Monday, 12 August 2019 06:09

Sri Lanka risks losing debt market access if future Govt. policy changes

REUTERS: Sri Lanka could lose access to global debt markets if a new government shifts away from the country’s current fiscal policy that’s aimed at shoring up the economy and managing inflation, a Central Bank official said on Friday.

The Indian Ocean island nation is preparing for the Presidential election later this year and a Parliamentary election in 2020, which is causing uncertainty among investors over potential policy shifts.

“The question is whether any new government coming after elections will move in a different direction compared to what we have been or rather what this Government has been doing for the last four years,” Central Bank Senior Deputy Governor Nandalal Weerasinghe told Reuters in an interview on Friday.

“If anyone tries to move away from this fiscal, macro-economic stability, they will not have access to global markets,” he said.

The economy cannot afford to lose access to global markets as it has to repay more than $ 16 billion in foreign loans over the next four years.

“Anyone who comes to power will have to make sure we have access to a global investor base so that we can meet payments in the next couple of years through market borrowings,” Weerasinghe said.

During Prime Minister Ranil Wickremesinghe’s Government, the Central Bank had tightened monetary policies to back the administration’s overall goal of fiscal consolidation, an effort supported by a $ 1.5 billion loan from the International Monetary Fund.

Though Wickremesinghe is widely seen as a business-friendly leader, critics say his economic politics have stunted economic growth.

The Central Bank had introduced an inflation-targeting monetary policy and a flexible exchange rate, transformed short-term high-cost borrowings to long-term lower-cost ones, and reduced the outflow of foreign exchange for luxury goods.

Those measures contributed to pulling down the economic growth rate in 2018 to an 18-year low of 3.2%. A power tussle in 2018 for the Prime Minister’s job and this year’s Easter Islamist militant bombings, which killed more than 250 people, further weigh on the economy.


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