Sri Lanka plans fast-track laws and measures to attract foreign exchange

Sri Lankan President Gotabaya Rajapaksa delivers his national statement as part of the World Leaders Summit at the United Nations Climate Change Conference (COP26) in Glasgow, Scotland, Britain on November 1, 2021. Andy Buchanan/Pool via REUTERS

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COLOMBO, Jan 18 (Reuters) – Sri Lanka will introduce new laws to attract investment over the next three years, while policies to boost exports, tourism and remittances will be accelerated in a bid to rebuild foreign exchange reserves, President Gotabaya Rajapaksa said. Tuesday.

In a speech to parliament, Rajapaksa said a debilitating shortage of foreign exchange was inevitable unless spending was well managed.

“If we fail to control our spending, there will be a foreign exchange problem in the near future,” Rajapaksa added.

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“There should be a major development in the areas of foreign exchange to develop exports, tourism, remittances and information and communication technologies.”

The island nation is up to its neck in debt and although the central bank confirmed to Reuters that it had already released $500 million to repay an international sovereign bond maturing on Tuesday, most of it remained to be repaid.

In the rest of 2022, Sri Lanka will have to repay debt worth $4 billion, with the next tranche of a $1 billion international sovereign bond maturing in July. Official reserves stood at a meager $3.1 billion at the end of December.

Reserves were topped up last week via a $400 million swap with neighboring India, and Sri Lanka is negotiating another $2.5 billion via lines of credit from India and Qatar.

However, rating agencies have downgraded Sri Lanka several times in recent months due to fears of potential default. The government said it was committed to honoring all debt repayments, but ruled out asking for help from the International Monetary Fund (IMF).

“Sri Lanka’s forex challenge is a symptom of larger structural problems in its economy, so focusing solely on improving inflows will not be enough,” said Dhananath Fernando, economic analyst at Colombo-based think tank Advocata. .

“The government needs to engage in deeper SOE reforms, tax reforms and market-driven rupee adjustments to resolve its financial crisis, otherwise we will be constantly fighting fires.”

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Editing by Swati Bhat and Clarence Fernandez

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