Sri Lanka’s Top Economists demand USD 500 Mn ISB settlement be stopped

Sri Lanka’s Top Economists demand USD 500 Mn ISB settlement be stopped

Written by Staff Writer

11 Jan, 2022 | 9:16 am

COLOMBO (News 1st); Sri Lanka’s ailing economy continues to plunge into further chaos.

Economists opine, power outages, endless gas queues, acute shortages of chemical fertilizer despite permission being granted to import and companies limiting the import of milk powder is all a result of the deepening economic crisis.

Sri Lanka’s Dollar reserves, an essential counter asset to import goods depleted drastically in the recent past.

Although our foreign reserves propelled to 3.1 Billion USD following a 1.5 Billion Dollar currency swap with China, concerns continue to be raised on its adequacy to enable Sri Lanka’s economy to recover from its perilous state.

Interestingly, when analyzing the Central Bank’s weekly economic reports it is starkly evident that our Gold reserves too seem to be declining rapidly.

To provide further insight into this claim, in December 2021 alone Gold reserves worth 206.8 Million USD had been sold.

According to Economy Next, 3.6 tonnes of Gold were sold in 2020.

However, Governor of the Central Bank Ajith Nivard Cabraal supporting the sale of Gold says, it would enable for greater liquid reserves which are essentially more cash in hand.

Speaking to Economy Next, Cabraal has said “When reserves reduce we reduce the gold holding,” adding, “We bought gold when foreign reserves were going up’.

Amidst all this, Sri Lanka is scheduled to settle ISBs worth 500 Million USD on the 18th of this month.

Taking to Twitter the Governor of the Central Bank reiterated today that the 500 Million USD ISBs will be settled, noting it would be done on the 22nd of January.

Despite this claim, economists and other industry professionals bear a contradictory view of this decision.

They have hinted at Sri Lanka’s economic woes deepening further if 500 Million USD of limited forex reserves are utilized for such a payment.

As such, they have repeatedly urged for the settlement of ISBs to be postponed.

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