Sri Lanka will be negotiating a new loan from China to tackle balance of payment issues and debt restructuring with that country while contemplating the ease of import restrictions on non essential items including vehicles soon, Central Bank Governor Ajith Nivard Cabraal said.
He disclosed that Sri Lanka would try to negotiate a new loan from China to cushion the effects of the country’s debt repayments to China itself.
Responding to a question from journalists at a press briefing in Colombo on Wednesday he said that Sri Lanka has a very good understanding with China about its debt and debt repayment as well as investments.
“In this instance the assistance that has been sought may have been connected to the debt repayments that we are having. But it is only with regard to China,” he pointed out adding that Sri Lanka has an understanding with China that they would assist the island nation in making the repayments in that form.
“The central bank governor noted that Sri Lanka is also negotiating US$ 1 billion facility with India to import goods from the neighboring nation.
It’s a kind of an arrangement that would encourage us as well as help us to make repayments to those countries and at the same time promote more trade between the two countries as well.
He said that countries normally do that in the midst of changing circumstances in the economy and that’s the type of discussion they have had with China as well as India.
He revealed that those talks are at reasonable levels of advanced negotiations and they are looking forward to seeing some breakthrough in those as well.
The restrictions imposed on the import of vehicles and other non-essential items to Sri Lanka will only be lifted when there is an inflow of foreign exchange from other sources, he added.
He asserted that other than vehicles, all the other non-essential items are being imported ‘heavily’. “What is the non-essential item that is not available? If you go to any supermarket, you would find that almost every conceivable type of goods is available,” he emphasized.
He said that items which are available in any part of the world are imported to Sri Lanka as well and that they also in his view can sometimes be termed as non-essential, but those also are being imported.
“And that’s causing a fairly heavy outflow of foreign exchange as well,” he said, adding that this can sometimes disturb the overall importation as well because these items which are considered non-essential are flooding the market.
“But at the same time we have allowed those things. The only items that have not been allowed are some strategic items which are being manufactured in Sri Lanka particularly like tiles etc. and vehicles.”
“But that can only be eased once we see another inflow of foreign exchange coming in from other sources as well,” the governor said.
Mr. Cabraal said that one of the key sources that Sri Lanka is having is tourism.
“Tourism is an industry where the entire investment by all the Sri Lankan cooperates as well as the country as well as the government is as much as one trillion rupees.”