Sri Lanka is facing a deepening financial and humanitarian crisis that could lead to its bankruptcy in 2022 as inflation rises to record levels, a media report said.
Earlier, on August 30 last year, the Sri Lanka government declared a national fiscal emergency after a sharp depreciation of the country’s currency caused food prices to soar.
Suhail Guptil wrote in the Colombo Communiqué that for most of the past decade, Sri Lanka has been facing a double deficit, namely a fiscal deficit and a trade deficit. Since 2014, Sri Lanka external debt level has been on an upward trend, reaching 42.6% of GDP in 2019.
Guptil explained that the country’s accumulated external debt in 2019 was estimated at USD 33 billion, placing a huge burden on the country’s debt service.
Sri Lanka’s credit rating has since been downgraded to B from C by a number of credit rating agencies including Standard & Poor’s, Moody’s and Fitch, making it difficult to obtain funding through international sovereign bonds (ISBs), Guptil said.
Sri Lanka’s financial crisis was mainly caused by low growth rates (currently 4%) and huge debt service obligations, and the situation is getting worse.
As of November 2021, available foreign exchange reserves were only US$1.6 billion, while over the next 12 months, the Sri Lankan government and private sector will have to repay about US$7.3 billion in domestic and foreign loans, including US$500 million in international loans. Sovereign bonds to be repaid in January 2022, report says
Complete News Source : Hindustan Times
