Sri Lanka’s foreign reserves improve from USD 50 mn last year to USD 2.69 bn this March: Central Bank

Debt-ridden Sri Lanka’s foreign currency reserves improved to $2.69 billion in March 2023 from a mere $50 million in May last year, giving indications of marginal improvement of the island nation’s economy, data from the Central Bank said on Friday.

Sri Lanka has been in financial turmoil and its total debt is $83.6 billion, of which foreign debt amounts to $42.6 billion externally and domestic debt amounts to $42 billion.

In April 2022, Sri Lanka declared its first-ever debt default, the worst economic crisis since its independence from Britain in 1948, triggered by forex shortages that sparked public protests.

According to Central Bank of Sri Lanka data, the island’s foreign currency reserves had improved to 2.69 billion dollars in March 2023, an improvement from under 50 million in May last year.

Analysts said that the $2.69 billion, includes a 1.4 billion US dollar currency swap from China with conditions attached to its usage.

Therefore the usable reserves would be just 1.6 billion dollars, the analysts say.

By May last year, the country was deeply plunged into its worst-ever economic crisis since 1948.

Reserves not sufficient to pay for imports led to shortages of essentials and power cuts.

Sri Lanka was then thrown a lifeline with an Indian line of credit worth $4 billion which paid for the imports of essentials and fuel.

This triggered public protests which culminated in the resignation of the then President Gotabaya Rajapaksa.

The International Monetary Fund (IMF) bailout which was released mid-March amounts to nearly 3 billion dollars to be disbursed over 4 years.

The $2.69 billion dollar boost at the end of March was including the first tranche of over 300 million dollars released by the IMF.

“One of the key objectives of our IMF programme is to rebuild our foreign currency reserves. The IMF program and our reform agenda will work together to balance the economy and keep the external sector in check,” the central bank statement which shows the data said.

The government is under political pressure for introducing tough reforms on IMF diktat as they have begun to restructure debt both external and internal.The plan to restructure local debt is to be announced this month, officials said.