Sri Lanka foreign reserves at record low, politics in crisis

COLOMBO, Sri Lanka (AP) — Sri Lanka’s economy is in dire straits with its usable foreign reserves down to less than $50 million, the country’s finance minister said Wednesday.

Ali Sabry was speaking to Parliament after returning to Sri Lanka from talks with the International Monetary Fund. He said any IMF rescue program, including a rapid financing instrument needed to urgently resolve shortages of essential goods, would depend on negotiations on debt restructuring with creditors and would take six months to implement.

Sri Lanka is on the brink of bankruptcy and has suspended payments on its foreign loans. Its economic miseries have brought on a political crisis, with the government facing a protests and a no-confidence motion in Parliament.

The country is due to repay $7 billion this year of the $25 billion in foreign loans it is scheduled to pay by 2026.

“There is a severe risk in front of all of us,” said Sabri. He said Sri Lanka’s reserves stood at $7.6 billion at the end of 2019 and fell to $5.7 billion by the end of 2020 as payments outpaced inflows of foreign currency amid the pandemic.

The reserves declined to $3.1 billion by the end of 2021, and to $1.9 billion by the end of March, he said. With foreign currency in short supply thanks to less tourism and other revenues, official reserves were tapped to pay for importing essentials including fuel, gas, coal and medicines beginning in August 2021.

The bulk of Sri Lanka's remaining reserves — including a $1 billion equivalent SWAP facility from China, are not usable for settling dollar-denominated payments, he said.

Sabri’s comments came a day after the country’s main opposition party issued a no-confidence motion aiming at ousting Prime Minister Mahinda Rajapaksa and his Cabinet.

The opposition United People’s...