Dr. Nandalal Weerasinghe, governor of the Central Bank, told The Wall Street Journal that Sri Lanka’s economy will likely contract by more than 6 percent in 2022.
Nandalal Weerasinghe, the governor of the Central Bank of Sri Lanka, stated that the contraction in 2022 will be significantly greater than 6 percent due to the impact of political instability on IMF discussions regarding financial relief.
The Governor stated that talks with the IMF at the highest level regarding a multibillion-dollar bailout had stalled.
He stated that the country requires a stable political administration in order to advance discussions with the IMF on key structural reforms and to secure short-term bridge financing from other nations and multilateral organizations to help pay for essential imports such as fuel, pharmaceuticals, and fertilizers.
The Governor stated that a $500 million extension that was anticipated last month has not materialized, which has exacerbated Sri Lanka’s fuel shortages.
Similarly, no progress had been made on a $1 billion currency swap with the Reserve Bank of India, nor had China loosened restrictions to allow Sri Lanka to use a $1.5 billion currency swap.
In an interview with the WSJ, Governor Nandalal stated, “If Sri Lanka had gone to the IMF at least a year earlier than it did, and sought to restructure its debts while it still had $4 billion in reserves, it would have been in a better position.” That would have allowed Sri Lanka to pay for essential imports to maintain the country’s operation and alleviate the financial hardships of its citizens. The Government instead chose to wait.”