By: Staff Writer
Colombo (LNW):In the nine months leading up to September 2023, Sri Lanka received a total of 1.5 billion US dollars from its foreign creditors.
The Asian Development Bank (ADB) was the largest contributor, disbursing 529 million US dollars, followed by the World Bank with 442.8 million US dollars and the International Monetary Fund (IMF) with 343.7 million US dollars.
Other contributors included India (142.5 million US dollars), the Netherlands (7.4 million US dollars), the Saudi fund for economic development (5.6 million US dollars), and the Asian Infrastructure Development Fund (22.9 million US dollars).
Additionally, grants totaling 10.6 million US dollars were provided, with the World Bank contributing 8.4 million US dollars and Germany 2.1 million.
It’s noted that some countries may halt new loans after a default but resume after debt restructuring. Multilateral lenders typically initiate budget support loans following an IMF program, and in this instance, IMF loans are also budget support loans directed to the Treasury instead of the central bank.
Despite facing default, Sri Lanka is expected to continue repaying multilateral agencies, having made debt service payments of 912.8 million US dollars by September, covering principal repayments (631.9 million US dollars) and interest (280.9 million US dollars.
Sri Lanka’s economic stability has been affected by prolonged or insufficiently deep external debt restructuring, deterioration in the political situation (including a backlash to the reforms), and inadequate domestic revenue mobilization this year, World Bank report highlighted.
Moreover limited external financing support, a sharper global slowdown, and a prolonged recovery from the scarring effects of the crisis are key risks to restoring stability, regaining a sustainable growth path, and bringing Sri Lanka back to pre crisis rates of poverty.
The financial sector needs continuous monitoring, given high exposures to the public sector, rising non performing assets, and tight liquidity conditions.
The necessary macroeconomic adjustments may initially adversely affect growth, poverty, and inequality, but will correct overall imbalances, help regain access to international financial markets, and build the foundation for sustainable growth.
Mitigating the impacts on the poor and vulnerable remains critical during the adjustment it added.