Stop servicing debts to stop Dollar outflows

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By Rajiesh Seetharam

Sri Lanka has continued to servicing its International Sovereign Debts (ISB) despite losing access to international capital markets, which has drained the foreign exchange reserves stated Verite Research Executive Director Dr Nishan De Mel. 

Speaking exclusively to Finance Today, Dr Mel noted that an economy is an ecosystem where a balance should be maintained. “We had to reduce our foreign borrowings. However when we lost our access to international capital markets in short period, it reduced our foreign exchange reserves drastically. The best option for the Government at that time would have been to stop servicing the external debts, and to go on for a debt restructuring programme. 

Instead the Government continued servicing the ISB’s, for which it had to clamp down on the dollars needed for the rest of the economy and that is the reason for the present shortage of commodities like fuel and gas. At least now, government should stop servicing the July ISB payments and announce a proper debt restructuring programme,” noted Dr Mel.