ECONOMYNEXT – Sri Lanka is talking to China and several other bi-lateral lenders to reprofile debt, State Minister for Samurdhi and micro-finance Shehan Semasinghe said as the country grapples with a worsening foreign exchange crisis amid liquidity injections.
“We have initiated talks with China and several other countries to reprofile debt,” Minister Semasinghe told parliament. “These talks are becoming successful.”
Reprofiling is a term used to describe debt where the maturity is extended without a hair cut.
China has in the past generally given new loans to pay installments falling due.
Sri Lanka is also talking to banks in the Middle East for facilities worth 2 billion US dollars, Minister Semasinghe said.
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Finance Minister Basil Rajapaksa will also visit India shortly for further talks on credit lines for a billion US dollar credit line. A 500 million US dollar credit line for fuel is to be activated from April.
Sri Lanka’s forex reserves have been falling amid liquidity injections made to keep rates low, as the domestic economy was unable to generate the savings from inflows to finance maturing debt.
In October the central bank began to give ‘reserves for imports’ enforcing a peg at 200 for trade, further depleting remaining reserves and forcing it to print money to sterilise interventions to maintain a policy rate. (Colombo/Feb25/2022)
