Government expects BOP surplus this year; affirms ability to honour all foreign debt
Expects to generate US$ 32bn in forex inflows and outflow estimated at US$ 27.6bn
Targets FDI to the tune of US$ 4.9bn banking on Colombo Port City, H’tota industrial zone and pharma zone
The government expects to end the year with US$ 4.4 billion Balance of Payment (B0P) surplus this year after successfully meeting US$3.7 billion foreign debt service payments.
State Minister of Money & Capital Market
and State Enterprise Reforms Ajith Nivard Cabraal revealed that the government has set a target to generate an ambitious US$ 32 billion in foreign exchange inflows while expecting US$27.6 billion in foreign exchange outflows this year year.
The country recorded a surplus of US$ 760 million in the BOP for the last time in 2019 after several years. However, it returned to a deficit since the second quarter of last year. The Treasury has forecasted a deficit of US$ 1.4 billion in BOP for last year.
“We are targeting US$ 32 billion forex inflows this year, including US$13 billion inflows from merchandise exports by maintaining 2018 level of exports with a focus on boat-building, minerals etc. In particular, we are targeting US$1 billion from gem exports, which is understated in current merchandise exports as most of it currently is being exported through Thailand,” the State Minister told reporters in Colombo yesterday.
The government targets to increase service exports to US$ 6.1 billion this year, while earning US$ 1.5 billion as tourism earnings with the re-opening of the country for foreign travellers last month.
Says US$ 1.5bn swap line with People’s Bank of China to be finalized in two weeks
Says negotiations moving ahead with China Development Bank for US$ 700mn loan facility
The worker remittance inflow is expected to grow to US$ 8 billion this year, as the government expects the growth trend seen last year in remittance inflows to continue.
The government also expects the country’s highestever FDI inflows of US$ 4.9 billion this year, betting on Colombo Port City, Hambantota industrial zone and pharmaceutical zone.
The government expects an increase in FDI inflows to Colombo Port City once the proposed Colombo Port City legislation is cleared by the Parliament.
Cabraal noted that the proposed legislation is likely to be tabled in Parliament at the beginning of next parliamentary session.
Meanwhile, he expressed his full confidence on servicing US$ 3.7 billion external debt obligations on time, without the support of International Monetary Fund (IMF), while relying mostly on non-debt creating foreign exchange inflows generated within the economy.
The government has already serviced US$ 500 million worth of ISBS in January this year.
“We are confident that necessary forex inflows can be generated within our economy. We are working on different areas, which can provide those inflows to the country. With US$ 32 billion FX inflows, we can very comfortably repay our external debt obligations,” he stressed.
Although, many parties see the need for seeking IMF assistance at this juncture, the State Minister claimed that, if Sri Lanka was to seek IMF assistance, the country would have to agree to certain conditions that may prove unfavourable, similar to the last IMF programme.
“We don’t have anything against IMF. We had the largest-ever facility obtained by Sri Lanka, which was US$ 2.6 billion in 2007-2208. It was necessary at that time due to several reasons. However, those reasons are not there anymore. Now, we have to find ways and means to increase foreign inflows to the country,” he added.
He also expressed confidence on rolling-over the US$ 1.3 billion worth of Sri Lanka Development Bonds (SLDBS) during the year, despite undersubscription of SLDBS at the last auction.
In addition, he said the People’s Bank of China has guaranteed the government of the proposed US$1.5 billion swaps line with Central Bank, which is likely to be finalised within next weeks.
Further, negotiations are progressing with China Development Bank for a US$ 700 million loan facility, which includes US$ 200 million in Renminbi.
While assuring full settlement of the upcoming US$1 billion ISB due in July, he noted that US$ 350 million of it is now held by Sri Lankan individuals and institutions.
Meanwhile, the government projects expenditure on merchandise imports to increase by at least US$1.5 billion to US$ 17.5 billion considering the growing crude oil prices in the global market.
“In addition, we estimate another US$1 billion for imports linked to FDI projects,” he added.
Further, US$ 4 billion outflows are expected in travel, health and education services while US$ 1.4 billion is estimated as divided outflows for the year.
However, the State Minister noted that these targets remain sensitive to global and local developments.
“These are estimates, we may adjust these figures from time-to-time as and when things develop,” he said.