Sri Lanka to use reserves to repay $1 bln loan
Posted on January 12th, 2019
COLOMBO, Jan 10 (Reuters) – Sri Lanka has arranged $1 billion to repay a five-year sovereign bond maturing next week partly from its declining reserves, sources from both the central bank and finance ministry said on Friday.
Originally the island nation’s three state banks were to borrow up to $1 billion from foreign sources before the end of 2018 to pay off the loan.
We could not raise the whole $1 billion through state banks. So the reserves also will be used to fill the gap,” a government official who is aware of the repayment details told Reuters, asking not to be identified.
He declined to comment on how much of the reserves would be used for the repayment.
January 12th, 2019 at 3:31 pm
Quoted from AFP.
(AFP) Sri Lanka’s prime minister said the country was struggling to pay back its ballooning foreign debt, blaming a recent political crisis for dealing a “death blow” to the economy.
Ranil Wickremesinghe said his government was scrambling to raise $1.9 billion to help service a first debt payment of $2.6 billion, that is due on Monday.
Sri Lanka faces $5.9 billion in foreign debt repayments in 2019, a record for the cash-strapped island.
The country lost $1 billion in foreign reserves during a power struggle between Wickremesinghe and President Maithripala Sirisena in late 2018.
Sirisena sacked Wickremesinghe in October and later dissolved parliament to quell any opposition, but Sri Lanka’s courts deemed the move unconstitutional.
Wickremesinghe was reinstalled 51 days later but not without a cost, the prime minister said.
“We are yet to quantify the losses, but it was a death blow to an economy that was struggling to recover,” Wickremesinghe told parliament.
Three global ratings agencies downgraded Sri Lanka during the crisis, making it more expensive for the Indian Ocean nation to access foreign loans.
Sri Lanka hopes to raise $1 billion from the international debt market, another $500 million from China and Japan and a further $400 million from the Reserve Bank of India.
Wickremesinghe has dispatched his finance minister to Washington to try to revive a loan arrangement with the International Monetary Fund that was suspended during the chaos.
Sri Lanka narrowly averted defaulting on its sovereign debt after Wickremesinghe’s reformed administration introduced a plan late last month to meet urgent spending obligations for the first four months of 2019.
Sirisena came to power in 2015 with the help of Wickremesinghe’s United National Party but personal and political clashes came to a head before the October sacking.
January 12th, 2019 at 3:34 pm
The 51 day administration caused massive loss to the nation. Three global ratings agencies downgraded Sri Lanka during the crisis, making it more expensive for the Indian Ocean nation to access foreign loans.
Such political instability must not have happened. If only Sirisena consulted the Supreme Court before his stupid action.