'Glimmer of hope' for Sri Lanka amid 'encouraging factors', says foreign minister

Sri Lanka has been struggling to recover from the worst economic crisis in its history, but there is a “glimmer of hope” amid improvements in some areas, the country’s foreign minister said on Tuesday (May 2).

“Inflation is under control; tourism has bounced back,” said Mr Ali Sabry. He added that previously soaring prices have stabilised due to the Sri Lankan rupee’s 11.2 per cent gain on the dollar.

Migrant workers are also contributing to the recovery by sending money back to their families in Sri Lanka, he noted.

“With that, (there’s a) glimmer of hope for us, but we are not out of the woods,” he told CNA’s Asia Now from South Korea, where he was attending an Asian Development Bank (ADB) meeting.

With help from the International Monetary Fund (IMF), ADB and the World Bank, Sri Lanka “should be able to see some sort of growth” from next year, following a further recession this year, Mr Sabry said.

Sri Lanka’s central bank forecast the economy will shrink by 2 per cent this year but expand by 3.3 per cent in 2024. The prediction is more optimistic than the IMF’s, which pegged contraction this year at about 3 per cent and growth of 1.5 per cent next year.

TOURISM KEY TO RECOVERY

Tourism is “central” to Sri Lanka’s recovery, said Mr Sabry, calling it “one of the lowest hanging fruits”.

While numbers have come down “drastically” since the highs of about 2.4 million tourists in 2018, he said, there has been a “continuous inflow” of tourists in the last eight months.

While Sri Lanka’s tourism industry has been affected by Russia's invasion of Ukraine, given that both Russians and Ukrainians have been among its top 10 tourist arrivals, Russian tourists have continued to visit the island nation, he said.

Mr Sabri also highlighted the strong support from countries like India, Germany and France. He added that he also looks forward to tourists from China and Japan.

“Tourism seems to be good (by) all indications … and most of the travel agencies, as well as sites and promoting agencies, have identified Sri Lanka as one of the very good markets for the coming few months,” he said.

COMPLETING THE DEBT STRUCTURING PROCESS

Mr Sabry also expressed optimism on his country’s road to debt restructuring. Sri Lanka is on track to complete the debt restructuring process in time for the first review in September, said the foreign minister.

“We have introduced price-sensitive, cost-reflective pricing in so many areas. SOE (state-owned enterprise) reforms are on the cards and tax reforms have come into play,” he said.

“There is a sense of stability in the country, and we have eliminated all sorts of queues and the shortages.”

Sri Lanka owes about US$17 billion in foreign debt, including to India and China. Both countries have agreed to restructure their loans, which prompted the IMF to extend Colombo a lifeline of US$3 billion.

In return, Sri Lanka has promised to restructure state-owned enterprises and privatise the national airline. It has also introduced higher taxes to pay for essentials like food and fuel.

“We are confident, just like we managed to secure the debt restructuring assurances from our friends and the creditors, we should be able to restructure it because that's good for everybody. Without debt restructuring, our debts are not going to be sustainable,” he said.

Mr Sabry said that a lack of debt sustainability will not be good for investment or creditors, adding that the shorter the discussions on restructuring go on for, the better for all parties.

“I know some tough negotiations (are) around the corner, but so far the signs are encouraging from our friends, both bilateral and otherwise,” he said.

He added that he expects the island nation to achieve sustainable debt by 2027.