Sri Lanka US$6.9bn debt service in 2022, 39-pct owed to domestic holders

ECONOMYNEXT – Sri Lanka’s 2022 debt service payments of 6,919 million dollars about 2.2 billion US dollars Central Bank Governor Nivard Cabraal said, which is close to 40 percent of total payments.

Sri Lanka has to pay 6,919 million US dollars in interest and capital payments of foreign currency debt in 2022 out of which 4,197 million was due to foreign holders.

About 2,247 million dollars are owed to domestic holders including in Sri Lanka Development Bonds, foreign currency banking unit borrowings and domestic holdings of international sovereign bonds.

Other than the sovereign bonds other loans are expected to be rolled over, he said.

However 1.5 billion US dollars in sovereign bonds however will not be rolled over.

Cabraal said a 500 million US dollar bond will be repaid in January 18 and was also planning to repay a billion US dollar bond falling due in July 2022.

Bilateral and multilateral debt service was about 2.3 billion US dollars.

Many of the lenders disbursed more than the outflows in any given year in new loans making them almost ‘self financing,” he said.

For example in the case of the Asian Development Bank, the projected disbursements are higher than the debt services.

“This is the case in several other countries,” he said.

The practice had been followed for many years where rupee cost of foreign projects and grants are funded with domestic taxes and borrowings and the dollars held for repayment.

For several years China has been giving budget support loans to more than cover its debt repayments.

Cabraal told reporters on January 12 that another new loan is expected to be given.

Sri Lanka however has lost the credibility of its 200 to the US dollar soft-peg with the US dollar and reserves are being used for imports and the interventions are being sterilized with new money.

As long as dollars sales for imports are sterilized, preventing rates from coming down the central bank cannot collect reserves on a net basis.

The central bank has placed surrender requirements on the peg which is under pressure. (Colombo/Jan13/2021)

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