Pandemic-hit FDIs Crumble in 2020
BY ISHARA GAMAGE
Sri Lanka’s foreign direct investment (FDI) to new companies were negligible in 2020, the Central Bank of Sri Lanka (CBSL) stated in its year 2020 annual report. However, FDIs, including foreign loans to BOI companies, were limited to US dollars 670 million in 2020, in comparison to US dollars 1,189 million in 2019.
An FDI target of $ 2 billion was expected last year. “The moderation in FDIs could be primarily attributed to the COVID-19 pandemic-related uncertainties in global financial markets that led to global FDI flows recording a significant decline in 2020,” it stated. According to CBSL, FDIs in 2020 were primarily in the form of intercompany borrowings and reinvested earnings from existing FDI companies. On a sector-wise breakdown, major FDIs were received by projects related to property development, telecommunications, textile and hotels sectors.
Despite the moderation in FDIs in 2020, the Government expects FDIs, particularly to the Colombo Port City and the Hambantota Port Project, to materialise in the near term, with the finalisation of the Colombo port city legislative framework and the interest shown by foreign investors in recent times.
Sri Lanka is projecting exports of US$ 12.5 billion for 2021 up from 10.0 billion in 2020. The CBSL is expecting imports to grow to US$ 17.8 billion in 2021 from 16.1 billion in 2020. CBSL also projecting foreign reserves of 3.2 months in 2021 down from 4.2 months in 2020.
In 2020 Sri Lanka ended the year with foreign reserves of 4.2 months of imports after projecting 4.2 months. An ‘investment trends monitor’ issued by the United Nations Conference on Trade and Development (UNCTAD) stated that global FDI collapsed in 2020 by 42 per cent to an estimated $859 billion from $1.5 trillion in 2019.