Pulling back from the precipice: A Pathfinder perspective

Sri Lanka is facing what is arguably its most challenging external financing crisis. Gross Official Reserves have declined to USD 1.6 bn as at end-November. Repayments over the subsequent 12 months amount to about USD 7 billion. The authorities have responded with import and capital controls as well as a fixed exchange rate based on moral suasion by the CBSL and rationing of foreign exchange by the commercial banks. This has resulted in a scarring of the economy which will inevitably have an adverse impact on growth, employment and incomes. Inflation is rising and is on the verge of reaching double digits and shortages constantly emerge of essential goods and services.