ECONOMY

Sri Lanka Central Bank Preparing Economic Stability Roadmap

Sri Lanka’s new central bank governor said he will soon unveil a roadmap to ensure economic and financial stability as the nation faces depleted foreign exchange reserves and looming debt payments. 

“The central bank’s first and urgent priority under my watch, will be to provide clarity with regard to the movement of Sri Lanka’s macro-economic fundamentals,” Ajith Nivard Cabraal, the Central Bank of Sri Lanka’s newly appointed governor, said in a statement after taking charge Wednesday. “A policy package in the form of a short-term road map” will be soon announced, he said.

Sri Lanka’s foreign exchange reserves have declined as measures to contain the Covid-19 pandemic hurt economic activity, including tourism that has accounted for about a fifth of the island nation’s gross domestic product. 

Authorities have so far resorted to emergency measures such as capital controls, import curbs, an interest rate hike and a drive against hoarding of food stocks after forex reserves dropped below the minimum desired three-months of import cover. 

“The government, bankers, importers, exporters, lenders, borrowers, investors, developers, service providers, industrial businesses, exchange houses, retailers, wholesalers and most importantly, the people of Sri Lanka must experience economic stability,” Cabraal said in the statement. “It is then that undue fears are allayed.”

The nation’s dollar bonds fell for a second day, with the yield on the March 2030 notes up 42 basis points to 15.7%, according to data compiled by Bloomberg.

Sri Lanka’s foreign exchange reserves fell below $4 billion after it used part of the pile to repay $1 billion of debt in July. Authorities have maintained that they have made arrangements to service another $1.5 billion of foreign bond payments due next year.

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