Sri Lanka closes three foreign missions as dollar crisis deepens


Sri Lanka on Monday announced the closure of three diplomatic missions abroad as part of an attempt to restructure to save badly needed foreign exchange reserves and minimize expenses in the wake of severe challenges. economic issues posed by the COVID-19 pandemic.

The Sri Lankan High Commission in Abuja, Nigeria, the Sri Lankan Consulate General in Frankfurt, Germany, and the Sri Lankan Consulate General in Nicosia, Cyprus, will be closed as of December 31, the ministry said. Foreign Affairs.

“The restructuring is being undertaken with the aim of preserving the country’s essential foreign exchange reserves and minimizing the expenses associated with maintaining Sri Lanka’s missions abroad,” the ministry said in a statement.

Sri Lanka’s tourism-dependent economy has been hit hard by the pandemic, and the government in March last year imposed a broad import ban to bolster foreign exchange reserves, triggering shortages of essentials such as fuel and sugar.

The island nation is currently facing a shortage of basic necessities in the face of dwindling supplies. At the end of November, just under $ 2 billion in reserves could only cover one month of imports.

The government ordered the shutdown of the only oil refinery in mid-November because of the lack of dollars to pay for crude oil imports.

Exporters faced forced conversions of their export earnings into local rupees and migrant workers were tricked into sending dollars through the central bank system when the official conversion rate was set at 200 rupees to the dollar. .

Fitch downgraded Sri Lanka’s sovereign rating to CC ‘from CCC’ this month, saying there is an increased likelihood of default in the coming months given the worsening external liquidity position of the country underlined by a decline in foreign exchange reserves.

The New York-based rating agency said it would be difficult for the government to meet its external debt obligations in 2022 and 2023 without new sources of external funding.

The bonds include two international sovereign bonds of $ 500 million due January 2022 and $ 1 billion due July 2022, he said.

The Central Bank of Sri Lanka, however, said last week that Sri Lanka’s foreign exchange reserves, which fell to $ 1.58 billion in November, would double to remain above $ 3 billion by now. late this year, saying the country’s economy has shown resilience throughout 2021 despite headwinds from the economic impact of COVID-19.

The bank said Sri Lanka has successfully fulfilled its debt obligations by repaying foreign loans, including payments on international sovereign bonds.

Progress is underway in negotiations on other arrangements to attract capital flows, the Central Bank of Sri Lanka (CBSL) said in a statement on Wednesday.

Although no details on the expected entries were given, officials said a $ 1.5 billion swap with China was in sight.

(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)

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