The Governor of Sri Lanka’s Central Bank recently announced that the country’s borrowing of USD 200 million will be settled in August or September 2023. Speaking at a briefing following the decision to relax policy rates, the Governor assured reporters of the bank’s commitment to meeting the repayment timeline.
Sri Lanka, grappling with a severe shortage of US dollars for several months, had borrowed the funds from Bangladesh in May 2021. The original repayment deadline was set for April of the following year but was not fulfilled.
In April last year, Sri Lanka made headlines when it declared default on its entire external debt of $51 billion. Pursuant to the agreement with Bangladesh, the loan was initially expected to be repaid by March.
However, due to the persistent shortage of foreign exchange reserves in the island nation, Sri Lanka sought an extension of the repayment period from Bangladesh Bank. The extension was granted, taking into account Bangladesh’s own depleting foreign exchange reserves.
Under the revised deadline, Sri Lanka is now required to repay the loan by September this year. The Central Bank’s Governor expressed the institution’s determination to fulfill its obligations and settle the outstanding amount within the agreed timeframe.
This development sheds light on Sri Lanka’s ongoing efforts to address its economic challenges and stabilize its financial position, as it grapples with the repercussions of the acute shortage of US dollars and works towards strengthening its foreign exchange reserves.