Sri Lanka reserves drop to $1.93 bn in March, $8.6 bn due in payments this year

Updated on Apr 07, 2022 05:45 PM IST
Sri Lanka crisis: An estimated $8.6 billion in debt payments fall due this year, according to Bloomberg, and low reserves raise questions about the ability to pay even a part of this sum.
nA man carries sacks of red onions at a market, amid the country's economic crisis in Colombo, Sri Lanka, April 7, 2022. REUTERS/Dinuka Liyanawatte(REUTERS)
nA man carries sacks of red onions at a market, amid the country's economic crisis in Colombo, Sri Lanka, April 7, 2022. REUTERS/Dinuka Liyanawatte(REUTERS)

Sri Lanka's foreign exchange reserves dropped 16.1 per cent to $1.93 billion in March from a month earlier, the central bank said Thursday, as the island nation struggles through its worst economic crisis in decades. Protests have erupted over the shortage of food, fuel and other essential commodities; last week thousands took to Colombo streets to demand president Gotabaya Rajapaksa's resignation, prompting clashes outside his home that left 15, including police personnel, injured and led to a brief state of emergency.

An estimated $8.6 billion in debt payments fall due this year, according to an analysis by Bloomberg, and rapidly falling reserves raise questions about Sri Lanka's ability to pay even a part of this sum.

Sri Lanka had about $2.3 billion of foreign reserves in February.

Explained: Sri Lanka economic crisis and India's $2.5 billion line of credit

The country also faces a test of global investor confidence later this month, Bloomberg reported, when interest payments on a 2023 dollar bond and 2028 note fall due; the two combined amount to $78.2 million.

"To get out of the crisis, the quick establishment of an effective government should be the first priority. Clinching a deal with the International Monetary Fund (IMF) should be next," Bloomberg Economics' economists Ankur Shukla and Abhishek Gupta wrote in a note Tuesday.

READ: 5 charts which explain the Sri Lanka economic crisis

Sri Lanka is due to hold talks with the IMF this month. Earlier today the president named a team of experts to advise the government on this crisis.

The country has also reached out to India and China for help. 

The Indian government responded swiftly with lines of credits totalling over $2 billion to help buy food, fuel and other essentials. Shipments of petrol and diesel have already been delivered, with another of rice due soon.

But ahead of talks with the IMF there was another setback - finance minister Ali Sabry quit 24 hours after replacing president Rajapaksa's brother Basil.

READ: Finance minister quits after govt loses majority in parliament

Sabry today said Sri Lanka must restructure a $1 billion sovereign debt due in July and said help must be sought not just from the IMF but also the World Bank and Asia Development Bank. "… there is no other solution…" he said.

The country has yet to appoint a replacement for Sabry.

Rajapaksa, meanwhile, has refused to step down despite his coalition losing its majority. An offer to the opposition to form a 'unity' government was dismissed amid insistence the Rajapaksa government must go 'starting with the president'.

Pressure was ramped up Tuesday after two ruling coalition lawmakers warned of 'anarchy' sans an interim government.

READ: 'There can be a bloodbath…': Sri Lankan ruling coalition MPs' warning

With input from Bloomberg, Reuters

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  • ABOUT THE AUTHOR

    Chandrashekar Srinivasan is a Senior Editor at Hindustan Times. A journalist with 11+ years across print and digital media, he also has degrees in Sociology and Economics. He has worked in the political, business, sports, and entertainment news spaces, but is happiest just watching football.

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