According to government Debt Settlement plan-2021: SL to Roll Over US$ 3B SLDB and FCBUs
By Ishara Gamage
The Sri Lankan Government intends to rollover at least US $ 3 billion worth of foreign debt commitments due in 2021, Officials at the Ministry of Finance and the Central Bank of Sri Lanka (CBSL) told Ceylon FT.
In addition, the Government has decided to obtain a concessional loan of US $ 700 million( with a three year settlement period) in two installments of US $ 300 million and US $ 400 million during the first quarter of this year. The Government intends to receive the first installment within the next few weeks.
The Government also expects to receive another $ 1.8 billion in concessional loans and grants this year for various State projects through bilateral and multinational lending arrangements/institutions such as the Asian Development Bank (ADB) the World Bank and the Asian Infrastructure Investment Bank (AIIB).
“If all goes as planned, the Government expects a foreign reserve target of US $ 5 to 5.5 billion by the end of this year. If the relevant loans does not roll in over as expected, our year-end reserves could drop to $ 4 billion,” government and CBSL spokespersons said.
They also said the current situation will not be so severe in the country's balance of payments in 2021, but next year's situation will be somewhat difficult.
The Government owes about $ 4.15 billion in foreign loans and installments this year. In addition, the CBSL expects a current account deficit of at least $ 1 billion this year.
“We can expect more dollar revenue from tourism and foreign remittances in 2021 compared to 2020.There is a tendency for crude oil prices to rise in the world market to some extent. However, due to the rainy weather, the demand for thermal power to generate electricity may decrease this year,” CBSL officials said.
The Government plans to raise about US $ 2.5 billion through SWAP facilities through the Central Banks of India and China.
But economists say the Government needs to have a balance of payments (BoP) assistance programme with the International Monetary Fund (IMF) next year as it faces similar debt and premium payments of more than $ 4.2 billion overseas.
Accordingly, the Government intends to reach an agreement with the Indian side to postpone the payment of the $ 400 million SWAP facilities with The Reserve Bank of India (RBI) for another six months, which is due to expire in February.
However, The Reserve Bank of India (RBI) had earlier stipulated that the government should go for a BoP relief program with the IMF in providing the facility.
The relevant government parties have not yet stated whether the relevant condition is still valid.
In addition, the Government plans to acquire an additional $ 1 billion SWAP facilities from the Federal Reserve Bank of India this year.
According to Government sources, the Indian government has already imposed several conditions on the Sri Lankan Government to provide this SWAP facility. Among them is obtaining the assistance/equity partnership of an Indian partner for the East Container Terminal of the Port of Colombo. It is also stated that the removal of import restrictions on agricultural machinery and the removal of Turmeric import restrictions on India are among the other related Indian conditions.
The Government also expects another $ 1.5 billion SWAP facility from the People's Bank of China or the Central Bank of the People's Republic of China , this year.
In addition, the Government has decided to roll over $ 2.6 billion worth of Sri Lanka development bonds (SLDB) and Foreign Currency Banking Unit(FCBU) maturing this year. However, the agreement of the foreign banks in this regard should be a critical factor.
There are also a significant number of private sector foreign loan and premium payments this year.
At the end of 2020, the Government had about $ 5.5 billion in foreign reserves.