Feb 08, 2021 (LBO) - State Minister of Finance, Capital Markets, and State Enterprise Reforms Ajith Nivard Cabral says Sri Lanka is on track now to enacting an effective economic recovery to swiftly close the gap between pre and post-COVID-19 output losses.
He says the island's growth prospects are now positive, underscored by a stabilizing currency and sound debt repayment capacity.
“Sri Lanka is in a comfortable position with regards to its debt repayment ability and will not default on its payments,” he told Lanka Business Online.
“We see the rupee has become stable. The rupee was deprecating at the average rate of 6.8 percent for the five years under the last Government but in the last one year, we have been able to control it effectively and as result, the depreciation has been limited to just 2.6 percent, and if not for COVID, we would have seen an appreciation of the currency as well.”
However, Sri Lanka’s foreign currency reserves which were at USD 5.7Bn as of December 2020, have now marginally fallen below the foreign debt obligations for the first time in the recent past as foreign currency reserve cover falls below 1.0x.
According to the Strategy Report 2021 of First Capital Research, total rupee and USD bond obligations are high and closing in on LKR 1Tn in 2021E with total debt obligations including project loans rising to 2.7Tn 2021E from 2.4Tn in 2020.
Cabral says even though there were instances where rating agencies made uncomplimentary remarks, they have been able to come back and say Sri Lanka would probably be able to maintain an impeccable position vis-à-vis the debt repayment ability.
"We have a formula. There are two or three-ways in doing the same thing. The IMF prescription that is prescribed is not working; we will not adhere to selling assets, raising taxes."
"There will be rolling over of some of the debt while also using inflows for others. We are planning on some new inflows too for example in the gem industry and working on our remittances and balance of payments which we expect to be positive."
Speaking further on the island journey back to the new normal post COVID the state minister said the Government is also now focusing to start investment projects with construction permits and other support to be given soon to revive key sectors.
“We have enough knowledge about COVID–19, we need to get back to business and open up as this is the new normal.”