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Central Bank Governor says all  have an obligation to boost foreign reserves 

Central Bank Governor Ajith Nivard Cabraal on Tuesday declared that the onus to boost foreign reserves and the economy lies with all and not solely on the Central Bank.

He made this remark during his address as the Chief Guest at the ceremonial launch of the Real Time Gross Settlement System (RTGS) status of National Savings Bank (NSB).

“For Sri Lanka to overcome the foreign exchange challenge, all relevant economic parties have to take responsibility,” Cabraal said.

He emphasised that the country had to ensure “exporters, importers, those who borrow money, those who payback their loans, those who remit monies are all active in a way that would support the country’s efforts to find stability.”

He maintained that the ‘main trust and function of the Central Bank is to ensure stability’, which is considered its primary function, but also noted that without growth, the country cannot prosper and move forward. 

The RGTS status granted by the CBSL will enable NSB customers and its internal operations to transfer funds seamlessly and with the security and the supervision of CBSL.

Governor Cabraal noted that a specialised bank cannot gain the RTGS status without due process and commended the NSB for the achievement.

 The Sri Lankan government will meet all debt repayments in 2022 and work on a more comprehensive plan to address its dwindling foreign exchange reserves, said central bank governor Nivard Cabraal on Wednesday (Jan 12).

Sri Lanka managed to boost its reserves to US$3.1 billion (S$4.2 billion) at the end of December, thanks to a yuan currency swap with China worth US$1.5 billion. 

The government is also currently in talks with India and Qatar to obtain multiple credit lines and a currency swap arrangement, totalling around US$2.9 billion.

Sri Lanka needs to repay about US$4.5 billion in debt this year, starting with a US$500 million International Sovereign Bond (ISB) maturing on Jan 18 for which fund allocations have already been made, Mr Cabraal said.

“Not paying debt will push us into bigger challenges,” Mr Cabraal said during an event organised by the Department of Government Information.

“We need a more comprehensive, longer-term plan to address debt and other issues in the Sri Lankan economy. Not honouring ISBs will get Sri Lanka into a path of pain.”

Due to the pandemic, Mr Cabraal said the country has lost about US$9 billion in tourism revenue in the last two years, but he expected a pickup in tourism in the next two to three months would help rebuild reserves.

Even before the pandemic struck, tourism had fallen off in Sri Lanka as a result of the Easter Sunday bombings in 2019 that targeted churches and hotels, and killed 267 people.

Mr Cabraal said the negotiations with India were at advanced stages. Sri Lanka is seeking a US$1 billion credit line, and a US$400 million swap arrangement with India, plus a US$500m credit line for fuel involving Indian Oil Corp, which has operations on the island.

The recent sharp increase in its energy import bill, due to surging global prices for oil and gas, has exerted more pressure on Sri Lanka’s reserves.

Discussions with Qatar for a US$1 billion credit line are also under way.

Mr Cabraal said the government could also look at a fresh loan from China, which is Sri Lanka’s fourth-biggest lender, behind international financial markets, the Asian Development Bank (ADB) and Japan.

Several analysts have said Sri Lanka may eventually need to go to the International Monetary Fund for a bailout – something the government has been reluctant to do.

“Approaching the IMF is not something to be taken lightly. The monetary board has had many discussions on this matter and we only see the IMF as one of many options,” Mr Cabraal said.

“Our view is that the path we are on is the most appropriate. The IMF is not a fix-all solution; it’s not a magic wand.”

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