Мобильный 1 Add news
March 2010
April 2010
May 2010June 2010July 2010
August 2010
September 2010October 2010
November 2010
December 2010
January 2011
February 2011March 2011April 2011May 2011June 2011July 2011August 2011September 2011October 2011November 2011December 2011January 2012February 2012March 2012April 2012May 2012June 2012July 2012August 2012September 2012October 2012November 2012December 2012January 2013February 2013March 2013April 2013May 2013June 2013July 2013August 2013September 2013October 2013November 2013December 2013January 2014February 2014March 2014April 2014May 2014June 2014July 2014August 2014September 2014October 2014November 2014December 2014January 2015February 2015March 2015April 2015May 2015June 2015July 2015August 2015September 2015October 2015November 2015December 2015January 2016February 2016March 2016April 2016May 2016June 2016July 2016August 2016September 2016October 2016November 2016December 2016January 2017February 2017March 2017April 2017May 2017June 2017July 2017August 2017September 2017October 2017November 2017December 2017January 2018February 2018March 2018April 2018May 2018June 2018July 2018August 2018September 2018October 2018November 2018December 2018January 2019February 2019March 2019April 2019May 2019June 2019July 2019August 2019September 2019October 2019November 2019December 2019January 2020February 2020March 2020April 2020May 2020June 2020July 2020August 2020September 2020October 2020November 2020December 2020January 2021February 2021March 2021April 2021May 2021June 2021July 2021August 2021September 2021October 2021November 2021December 2021January 2022
News Every Day |

The Tangled Diplomacy Of Sri Lanka’s Currency Crisis – Analysis

The Tangled Diplomacy Of Sri Lanka’s Currency Crisis – Analysis

By Dushni Weerakoon*

Sri Lanka ends 2021 with foreign currency reserves in hand (US$1.6 billion) to support a month of imports. For much of the year, a shortage of dollars saw uncleared essential imports piling up at the Colombo port as domestic prices soared. Directions from the country’s central bank to maintain an artificially fixed rate have seen a parallel black market emerge, as businesses have struggled to find hard currency.

Added to this, mandated conversion of foreign currency earnings into Sri Lankan rupees is instilling fear that the country is heading swiftly towards both a currency and economic crisis.

The last time that reserves fell to such a perilous state was in February 2009 amid the global financial crisis, as Sri Lanka battled the final stages of a separatist war. Then too, there was a stubborn disinclination to approach the International Monetary Fund (IMF) and instead lobby friendly governments for help.

With the very same political leaders and policy advisors at the helm, Sri Lanka has spent much of this year in government-to-government negotiations. The similarities end there. Unlike in 2009, the country is staring down the barrel of foreign debt settlements to the tune of US$4.5 billion on average per annum in the foreseeable future. That harsh reality surely calls for a rethink and reset of economic strategising this time around.

The reluctance to sign on to an IMF agreement is perhaps understandable. The ‘conditions’ tied to a rescue package typically call for austerity that can have destabilising socio-political effects. While there might be a softening of conditions in a COVID-19 ravaged global economy, helping Sri Lanka to regain its creditworthiness — from its current non-investment grade — will involve some bitter medicine. For governments opposed to making themselves accountable to the IMF and surrendering policy autonomy, the alternative is to put forward credible policy measures to achieve similar end goals.

Sri Lanka has failed to do this so far. In setting the 2022 Budget, the Treasury missed an opportunity to look beyond one-off tax measures to finance fiscal gaps. Similarly, a central bank road map spelt out intended actions to bridge the immediate foreign currency gaps. Both policy documents lacked the necessary details to allay concerns about Sri Lanka’s solvency weaknesses. The government is still hedging its bets that government-to-government deals — involving swaps, credit lines, equity sales and foreign direct investment (FDI) — will come in time to avert a major crisis.

Sri Lanka approached its regional powerhouses — China and India — for swaps and other credit lines early on. In what appears to be a reciprocal gesture, laws to ease rules and regulations governing FDI for the China-backed Colombo Port City were fast-tracked. India’s Adani Group was given a 51 per cent stake to develop Colombo port’s west container terminal. Several overtures were made to Middle Eastern countries, especially for oil import credit lines. A US$3.6 billion deal with Oman is on hold though, following a request for an offshore block in the Mannar Basin for oil exploration in lieu of interest payments. In this mixed bag is yet another controversial agreement to transfer a 40 per cent government equity stake in a natural gas power plant to a US-backed firm. The latter deal has even pitted the ruling coalition partners against each other.

All told, drumming up alternative financing arrangements has not been without diplomatic headaches for the government. A consignment of Chinese fertiliser imports that were deemed to have not met acceptable standards provoked a sharp rebuke from its embassy in Colombo.

In the meantime, India has expressed concerns over what it sees as China’s growing footprint in northern Sri Lanka power projects, a region that has traditionally been a beneficiary of Indian assistance. Still, following a visit by Sri Lanka’s Finance Minister in December, India agreed to work out an economic relief package to be announced in January 2022. There too though, protracted negotiations on yet another controversial Indian investment developing oil tanks in Eastern Sri Lanka are high on the agenda.

The upshot is that Sri Lanka is negotiating for economic assistance from a weak position. Until the parties are satisfied, delays to announced credit pipelines have become routine. This uncertainty is taking a heavy toll on business confidence and the economy in general, and by association, on the government’s credibility. Whatever scope was available at the beginning of the year to spell out and implement a convincing policy path has all but dissipated. The result is that Sri Lanka enters a new year with a black cloud of uncertainty hanging over its economy.

The longer the delay on decisive policy action to restore Sri Lanka’s sovereign creditworthiness and debt serviceability, the more painful the adjustment path will be. Even if the government is successful in securing some short-term funds to meet its immediate foreign debt settlements, alongside a quickened pace of FDI inflows, the scale of imbalances suggests that building more effective policy strategies will require near-universal sacrifice from Sri Lankans in the year to come.

*About the author: Dushni Weerakoon is the Executive Director and Head of Macroeconomic Policy Research at the Institute of Policy Studies of Sri Lanka.

Source: This article is published by East Asia Forum and is part of an EAF special feature series on 2021 in review and the year ahead.









Read also

Racing tips: Templegate NAPS Dan Skelton star to strike at local track on Sunday

Indian-origin scientist among UBC researchers unveil world’s 1st molecular-level analysis of Omicron

'Trump could end up in an orange jumpsuit' as the walls close in and his world 'crumbles': biographer


News, articles, comments, with a minute-by-minute update, now on Today24.pro

News Every Day

Sejarah Tim Liga Inggris Wolverhampton Wanderers

Today24.pro — latest news 24/7. You can add your news instantly now — here


News Every Day

Dolomites, Italy: Brenner Pass and Reifenstein Castle - Rick Steves Europe Travel Guide



Sports today


Новости тенниса
Australian Open

Медведев вышел в 1/8 финала Открытого чемпионата Австралии — 2022



Спорт в России и мире

Певец Газманов показал жену без купальника в бассейне на Мальдивах


Загрузка...

All sports news today




Загрузка...

Sports in Russia today

Певец Газманов показал жену без купальника в бассейне на Мальдивах


Новости России

Game News

Former Dragon Age producer Mark Darrah says 'BioWare magic is bullshit'


Russian.city


В Москве неисправный поезд парализовал движение на БКЛ метро


Губернаторы России
Сергей Собянин

Мэр Москвы Собянин: экономика справляется с COVID-19, пессимистические прогнозы не сбылись


За взятку задержан главврач СИЗО, где находились бывший схиигумен Сергий и Алексей Навальный

NetEase: Лукашенко сделал предупреждение о ядерном оружии, которое вызвало панику на Западе

В Госдуме отреагировали на слова Зеленского о «возвращении» Крыма

Доктор Руженцова допустила тяжелое течение заболевания при заражении штаммом «Омикрон»


Добровинский назвал сумасшедшими тех, кто подозревает вдову Градского в инсценировке ограбления

«Красивые до безумия»: Лобода запечатлелась с подросшими дочками на отдыхе

Бывшая супруга Александра Серова призналась, что «чуть-чуть» жалела о разводе с певцом

Сбежавший из России Моргенштерн сообщил об «отсутствии здоровья»


Аслан Карацев вышел в третий круг Открытого чемпионата Австралии по теннису

Тарпищев — о поражении Карацева на АО-2022: Аслан не умеет играть по счёту

Даниэль Коллинз отыграла сет и брейк и победила Клару Таусон в третьем круге Australian Open

Теннисистки из Самарской области прошли в третий круг чемпионата Австралии




Okko эксклюзивно покажет межсезонные контрольные игры ФК “Локомотив”

Смотреть онлайн Зенит — Эмирейтс. Прямая трансляция. Товарищеские матчи (клубы). 19 января 2022

"Ломанем так, что мало не покажется": Лукашенко предупредил Запад

Антирекорды заражений в Москве и Питере: коронавирус в России


Захарова назвала фейком статью Bloomberg о просьбе Китая «не нападать» на Украину

Пьяный водитель внедорожника сбил мать с 11-летней дочкой на тротуаре в Тюмени

Звезда «Сватов» Кошмал показала процесс обучения сына

Зеленский: Киев в скором времени провозгласит Акт объединения в Донбассе и Крыму



Путин в России и мире







Персональные новости
Russian.city

Александр Градский

В Москве вышли на след ограбивших вдову Градского преступников



News Every Day

Sejarah Tim Liga Inggris Wolverhampton Wanderers




Friends of Today24


Загрузка...
Музыкальные новости
"Воскресенье " Олег Митяев



Персональные новости
Близкий друг Путина миллиардер Пугачев. Вся правда о Путине, его семье и деньгах. В гостях у Гордона (2021)

Навальный об уволенном за пост священнике (2021)

Slava Marlow – суперуспех и депрессия в 21 год / вДудь (2021)

Обнаглевшие дети путинской элиты (2021)

Дайте собакам мяса (новый звук) -Владимир Высоцкий

Группа "Рождество" - песня "Так хочется жить!" (Видео с концерта в Киеве группы "РОЖДЕСТВО" в 2011 году в Доме офицеров)

Adriano Celentano Любимая песня Челентано (высочайшая энергетика) talentTV

Moscow.media