A Pathfinder Perspective on Urgent Reforms to Resuscitate the Economy

With known net debt service payments of USD 6.6 bn this year and current fully usable official reserves of less than USD 1 bn (2-3 weeks of imports), Sri Lanka is confronted with both a cash flow problem and a debt problem. The liquidity problem is compounded by the fact that the only known additional external financing, at this point, are lines of credit from India (USD 1.5bn) and Pakistan (USD 200 mn). These will certainly contain the depletion of reserves. They will not have a very material impact on the existing external financing gap, which is likely to be at least USD 7 bn this year, even with very optimistic assumptions about receipts from tourism, asset sales, remittances and FDI.