With Sri Lanka running out of foreign exchange reserves, the local elections that were scheduled for March 9 have been deferred due to a lack of funds to import essentials such as fuel, food and medicines to keep the island nation going.
According to a Hindustan Times report the usable forex reserves in Sri Lanka have dwindled to a mere USD 500 million.With Sri Lanka’s economy in the throes of the worst crisis since independence from Britain in 1948, the government is waiting for financing assurances from China, its largest bilateral lender, that would help to get the $2.9 billion IMF package. However, Beijing has kept the island nation in the lurch on the issue.
India on the other hand has strongly recommended Sri Lanka’s case to the IMF.Sri Lanka’s declining foreign currency inflows and increasing outflows are due to imports outpacing exports. Sri Lanka’s economy is in a crisis as the tourism sector which is the main forex earner for the country is in bad shape. Overseas citizens are sending less money home and the country has to shell out huge amounts of forex to service soaring foreign debt repayment mainly to China.
Although the Ranil Wickremesinghe government has been claiming to have a forex kitty of $2 billion some $1.5 billion as part of the balance of payments from China which cannot be used if the debt payments are not made, the Hindustan times report states.
While Sri Lanka is looking for financial support from Beijing with a 10-year debt moratorium as proposed by the IMF. China is hesitating to support the island nation as any waving of debt payment will have repercussions on huge loans it has given out to African countries as well as part of its Belt Road Initiative (BRI).
(This article was first published in India Narrative)