Economic crisis in Sri Lanka: usable foreign exchange reserves are now less than 50 million dollars

Sri Lanka’s Finance Minister Ali Sabry waved a metaphorical red flag in parliament on Wednesday as the struggling nation’s usable foreign exchange reserves fell below $50 million, heightening concern over its ability to provide food, fuel and other essentials to citizens, and to pay off massive foreign debts. .

Sabry – who resigned on April 4, a day after being appointed, to return – warned “we have spent two and a half times too much”. “In 2021, total income was 1.5 trillion (Sri Lankan) rupees…expenditure was 3.522 billion rupees…we were living (above) our means…” he said, warning legislators that help from the World Bank or the IMF would not solve deep-rooted problems. problems.

“The IMF is not Aladdin’s magic lamp,” he said.

Sri Lanka is on the verge of bankruptcy and has suspended payments on foreign loans, which total more than $50 billion, including $8.6 billion due this year.

Foreign exchange reserves were estimated at $2.31 billion in February. By March, it had fallen to $1.93 billion.

Global reserves have fallen 70% in two years, Reuters reported.

Last week, the World Bank announced it would provide $600 million in aid to help Sri Lanka meet payment requirements for essential imports.

Crisis in Sri Lanka will last at least two more years, says government

Sri Lanka will have to endure its unprecedented economic hardship for at least two more years, the country’s finance minister has said while warning of an impending cash crunch.

“People should know the truth. I don’t know if people realize the seriousness of the situation,” Finance Minister Ali Sabry said.

“We won’t be able to resolve this crisis in two years, but the actions we take today will determine how long this issue drags on.”

Public anger sparked sustained protests demanding the resignation of the government.

“Looking to replace an unrealistic budget, extend World Bank aid”

Sri Lanka plans to replace its current “unrealistic” budget and is in talks with the World Bank to extend its support from $300 million to $700 million, the country’s finance minister has said.

The island nation, hard hit by Covid-19 and strapped for revenue after steep tax cuts by President Gotabaya Rajapaksa’s government, is desperately short of foreign currency and has requested an emergency bailout from the International Monetary Fund.

Rampant inflation and shortages of imported food, fuel and medicine led to weeks of protests that sometimes turned violent.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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