Sri Lanka downplays default fears

[COLOMBO] Sri Lanka's central bank sought Wednesday (Dec 29) to downplay fears of a debt default, saying its foreign currency reserves had almost doubled and would remain "comfortable" throughout 2022.

The tourism-dependent economy was hammered by the pandemic and the government has imposed a broad import ban to shore up forex reserves, triggering shortages of essential goods such as fuel and sugar.

Earlier this month, ratings agency Fitch downgraded Sri Lanka, seeing an "increased probability of a default event in coming months" on the country's US$26 billion in foreign debt.

The central bank said Wednesday, however, that its foreign currency reserves had almost doubled to US$3.1 billion from US$1.6 billion last month, a level that was only sufficient to pay for a month's imports.

"Accordingly, the government and the central bank are confident that the reserve position will remain at comfortable levels throughout the year 2022," the bank said in a statement.

It also hit out at the "hasty and inexplicable decisions" of rating agencies.

AFP