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Sri Lanka Central Bank unveils six-month plan to stabilise economy

COLOMBO, Oct 1 (Reuters) – Sri Lanka’s central bank governor unveiled on Friday a six-month roadmap for putting the economy back on track and assured global investors and lenders of timely debt repayments while maintaining macroeconomic stability.

Governor Ajith Nivard Cabraal, while announcing a range of measures, also reiterated that the island nation would not seek any bailout from the International Monetary Fund.

Cabraal, making his first major policy address since his re-appointment as governor last month, sought to assure investors that Sri Lanka was aware of the gravity of its economic problems and would work fast to address them.

He said fears of a default were “misplaced” and the government was working towards increasing inflows to replenish foreign exchange reserves through measures including loans from other countries, currency swaps and monetising non-strategic assets.

Governor of the Central Bank of Sri Lanka (CBSL), Ajith Nivard Cabraal unveiled the ‘Six-Month Road Map for Ensuring Macroeconomic and Financial System Stability’ today (October 01).

“The rationale for this short-term focus is that given the forex challenge and debt service concerns, the proper management of this period will result in clarity and certainty being restored which will enable the economy to rebound,” he told reporters.

The government would unveil an “investor friendly” budget next month that will have simpler taxes and provisions to contain the deficit, Cabraal said.

In July, Sri Lanka’s fiscal deficit was at 3.2% of gross domestic product (GDP), higher than its revenues, which are at 2.9%, Finance Ministry data showed.

The central bank would also explore the possibility of buying back the entire lot of international sovereign bonds maturing in January and July 2022, which amounts to about $1.5 billion, if high discounts are prevalent in the market, he said.

These will be replaced with foreign government loans until the sovereign bond ratio declines to about 10% of GDP from the current 16%.

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