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Last Updated : 2024-04-30 08:57:00
18 December 2021 12:05 pm - 35 - {{hitsCtrl.values.hits}}
International ratings agency Fitch downgraded cash-strapped Sri Lanka Saturday by one notch to "CC" due to mounting fears of a sovereign default on its $26 billion foreign debt.
The downgrade came a day after Sri Lanka reported a 1.5 percent contraction in the third quarter of this year as a foreign exchange crisis wrecked its recovery from the coronavirus pandemic.
Fitch said the downgrade reflected its view of an "increased probability of a default event in coming months" as Sri Lanka's foreign reserves slumped to $1.58 billion at the end of November.
"We believe it will be difficult for the government to meet its external debt obligations in 2022 and 2023 in the absence of new external financing sources," the agency said in a statement.
It noted Sri Lanka had to repay two international sovereign bonds of $500 million in January 2022 and $1.0 billion in July 2022 with little improvement in capital inflows into the nation of 21 million people.
Foreign-currency debt service payments, including principal and interest, for next year total $6.9 billion, or the equivalent of nearly 430 percent of the island's official gross international reserves as of November 2021.
"Cumulative foreign-currency debt service, including interest and principal, amounts to about $26 billion from 2022 through to 2026," Fitch said.
The island's tourism-dependent economy was hammered by the pandemic and authorities responded to falling foreign exchange reserves with a broad import ban, triggering shortages including food, fuel and medicines.
The crisis has spread to affect manufacturing and services and agriculture has also suffered badly due to a ban on agrochemical imports.
Sri Lanka's economy had grown 12.3 percent in the second quarter but a third wave of infections that forced a 41-day curfew saw services and industries heavily affected, the statistics office said on Friday.
Its foreign reserves of $1.58 billion at the end of November compared with $7.5 billion when the government of Gotabaya Rajapaksa took over two years ago.
Supermarkets have rationed staples such as milk powder, sugar, lentils, tinned fish and rice as commercial banks ran out of dollars to finance imports.
The central bank has been appealing for foreign currency, even loose change people may have after returning from overseas trips, as the government desperately looks for dollars.
The banking regulator has also warned it will freeze accounts of informal money changers who offer higher prices for hard currency than official exchange rates.(AFP)
ShutDownSriLankanAirlines Saturday, 18 December 2021 12:19 PM
Oh man.. we’re doomed! Which foreign bank will accept LCs issued by a financial institution from Sir Lanka? There goes FDIs also. The Government should immediately shut down SriLankan airlines, we can’t afford to maintain their loss making operations!
Niyaz Cassim Saturday, 18 December 2021 12:55 PM
This slump is not merely because of the Pandemic. Mismanagement of funds and blatant disregard to prudent fiscal policies not to mention the diabolic wrong assessments by the so called financial experts of this doomed administration especially the CBSL governor who maintained that printing of money does not cause inflation. A basic AL student of economics will know that printing excess money leads to inflation.
Sri Saturday, 18 December 2021 01:26 PM
This problem is a man-made problem. Many people have contributed to this problems. one of main reason for this deteriorating economic situation is that unqualified people are given posts and positions in recent time in Sri Lanka. Countries are run not merely by politicians in this complicated world. A coordinated and collective efforts of experts in finance, economy, geopolitics, trade, business, diplomacy and other areas are needed in this modern world to save modern economies. yet, what happened in Sri Lanka in recent time. Racism is used, misused, and exploited to curb foreign investment from Sri Lankan diaspora community ( 3m). Civil servants, qualified and experience government servants in fact, make good policies to make progress and yet, good and experienced civil servants are sidelined in recent time. This include some best economists, academics and experts in economy and finance. instead former army commanders, friends , relatives and cohorts of MR are promoted.
Lion Saturday, 18 December 2021 01:35 PM
Cabral the wizard now will lambast the rating agency saying that they have not done a proper study before making their decision.
Ralaharamy Saturday, 18 December 2021 07:08 PM
How did you correctly predict this? Cabraal did open his mouth. He used your words exactly.
wahallu Saturday, 18 December 2021 01:37 PM
First time in SL history, it´s foreign reserves become negative soon. How this is possible? They cannot blame Covid, because our neighbors are doing well dispite of Covid. This is due to incapability. See the qualifications of our cabinet ministers? Most of then have no even basic education, so how can they leads country to prosperity. YOU who cast vote to these thugs can only blame yourself for this calamity, no one else. Check your brains fools.
sri Saturday, 18 December 2021 01:45 PM
90% of responsibility for this failure rests on wrong policies of continuous governments. Politicians are so arrogant in Sri Lanka. They think that they are kings when they come to power. they misuse power in appointing qualified people. Sri Lanka have had some good civil servants, expert academics, and economists, All former presidents and PMs have had some best economist advisers around them. civil servants, diplomats, and academics are promoted for their talents and skills and yet, today all gone ups and downs. Politicians do not take advise from these people but they do what they want to do . Take during the Covid-19. medical experts are made to listen to presidents as if president is a medical consultant, likewise, economic decisions are taken by politicians as if they are experts economists, likewise, experts are ignored in all other fields. Now the entire country has to pay the price for the blunders of some politicians: People must get rid of these politicians
Punchi Banda Saturday, 18 December 2021 01:50 PM
Do I hand in my collection of overseas currency notes before they are compulsorily confiscated to pay for The Rajapakse’s Christmas shopping
Ruwanwelisaya Saturday, 18 December 2021 01:53 PM
Can we send our will experienced in elimination service personnel to disappear these Fitch people who are upsetting us.
Nadarajah Saturday, 18 December 2021 02:34 PM
Thoughts and Prayers are with 69Millions
Dee Saturday, 18 December 2021 02:35 PM
Currently we have the economic masterminds to overcome any situation. Starting from the minister . And of course the monitoring minister for all ministries! We will sail through this and probably buy over Fitch ratings!
Sri Saturday, 18 December 2021 03:18 PM
It is some personal interest of MR family that causes a lot of trouble in the economic and financial sector. They have some internal trouble. each of them wants to have their friends in some posts. Look what is this fuss about Dr Jayasundara? Basil wants him and Shamel does not want him. What a joke is this? economy of the country is not run like this. There must a collective teams of economic experts to guide and advise government on economy. what if this Dr is a fake expert on economy?
Mokan Saturday, 18 December 2021 04:19 PM
Even God can’t save us any more
I love Lanka Saturday, 18 December 2021 05:32 PM
"Sri" The person who comments above always contributes a great deal of common sense and intelligence in these matters. If only more of my countrymen and women were that intelligent. SIGH!
Raveen Saturday, 18 December 2021 05:32 PM
Why can’t we appoint one of the army generals as economic chef.
Nomads Saturday, 18 December 2021 05:51 PM
(Idiot Govt. Policies Corrupted Govt.)x incapable unsuitable politicians - Debt repayment =SL Economic crisis.
sss Saturday, 18 December 2021 05:51 PM
non productive professional, politicians and urban people are leading middle income country living status from the dollars earned by productive blue collar workers like housemaids. So what else do you expect other than country going dollar bankrupt?
Mandayan Saturday, 18 December 2021 05:52 PM
I have said this many time and even DM hesitated to publish it: The Sri Lankan diasporas of all community is served grocery all others by South Indian states of Tamil Nadu, Andra, Kerala and also by Thailand. Business worth more than $2b per annum.There is big demand for fish from Northern seas and the fisheries minster is from North. And he does nothing and the Chinese Ambassador distributed free net. The catch is taken big times by Indians and exported. Our pandithayas talk and talk and brought the country to this level.
Dasa Dahanayaka Saturday, 18 December 2021 06:32 PM
Where is Dr Eliyantha White-Dada when you really need him !
Amjad Marikar Saturday, 18 December 2021 06:56 PM
Economic Armageddon!
Tikri Banda Saturday, 18 December 2021 06:57 PM
Bad Karma for the crimes of the thousands killed and disappeared is roaming our land inflicting disaster after disaster on us and destroying us from within.
Lankan patriot Saturday, 18 December 2021 07:06 PM
We may have won the war spending blood and treasure but it looks like we are loosing the peace
Nandasena Gopallawa Saturday, 18 December 2021 07:16 PM
Merry X'mas and a Happy New Year !
siripala Saturday, 18 December 2021 07:17 PM
Like the fertilizer ship saga, these governing people wait until others take action and then respond. Pathetic
Mohamed Ifaz Inamdeen Saturday, 18 December 2021 07:56 PM
No hope for progress unless this country hand over to the British again.
janp Saturday, 18 December 2021 08:10 PM
70 YEARS OF CORRUPTIONS, MISMANAGEMENT, STEALING,ROBBING STATE WEALTH,BY BOTH PARTIES WHO'S RESPONSIBLE?
Rotti Saturday, 18 December 2021 08:44 PM
Modaya cavun kanda yodaya enjoy people under the idiots
Vadivelu Yogaratnam Saturday, 18 December 2021 09:43 PM
Present government only good pardening convinced criminals by the highest court in the land.
Banda Saturday, 18 December 2021 10:02 PM
Doomsday prophets are at it again. Sri Lanka is resilient as always.
Jude Saturday, 18 December 2021 11:46 PM
Ratings කන්නද !????
Dasa Dahanayaka Sunday, 19 December 2021 07:04 AM
Meh yanna vidiyata, ratings nemey mukuth kanna nethi vevi
Terrence Sunday, 19 December 2021 09:53 AM
Fitch Rating Agency maybe disqualified for giving the actual present status quo and a Failure Rating Agency will report according to the agenda of govt.
DL Sunday, 19 December 2021 03:46 PM
“ZIMBABWE”
Suranimala Tuesday, 21 December 2021 06:56 AM
Truth hurts and absolute truth hurts absolutely!!!
bindu Wednesday, 22 December 2021 07:30 AM
This erosion started in 2005 with the help of Prabhakaran due to improper handling of state affairs.
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