COLOMBO: Sri Lanka will introduce new laws to attract investments over the next three years while policies to develop exports, tourism and remittances will be fast-tracked in a bid to rebuild foreign exchange reserves, President Gotabaya Rajapaksa said on Tuesday (Jan 18).
In a speech to parliament, Rajapaksa said a debilitating shortage of forex was inevitable unless expenditure was managed well.
"If we fail to control our spending, there will be a foreign exchange problem in the near future," Rajapaksa added.
"There should be major development in the areas of foreign currency to develop exports, tourism, remittances, and information and communication technology."
The island nation is up to its neck in debt and though the central bank confirmed to Reuters it had already released US$500 million to repay an international sovereign bond maturing on Tuesday, most of it was still left to repay.
In the rest of 2022, Sri Lanka needs to repay debt worth US$4 billion, with the next tranche of a US$1 billion international sovereign bond maturing in July. Official reserves stood at a meagre US$3.1 billion at the end of December.
Reserves were topped up last week via a US$400 million swap with neighbouring India, and Sri Lanka is negotiating a further US$2.5 billion through credit lines from India and Qatar.
However, rating agencies have downgraded Sri Lanka multiple times in recent months over concerns of potential debt default. The government has said it is committed to meeting all debt repayments but has ruled out seeking assistance from the International Monetary Fund (IMF).
"Sri Lanka's forex challenge is a symptom of larger structural issues in its economy so focusing only on improving inflows will not be enough," said Dhananath Fernando, an economic analyst at Colombo-based think tank Advocata.
"The government must commit to larger reforms on state enterprises, tax reforms and market-led adjustments to the rupee to resolve its financial crisis, or we will be constantly fire-fighting."