…Foreign reserves plunge to $1.58 billion

Foreign debts and high import bill have prompted Sri Lanka to close its High Commission in Nigeria and consulates in Germany and Cyprus, effective from January 2022. The country is currently left with foreign reserves of just $1.58 billion as at the end of November, down from $7.5 billion when President Gotabaya Rajapaksa took office in 2019. The country is also facing $26 billion foreign debt.

The Asiaqn nation had imposed a broad import ban to shore up forex reserves in March, 2020, triggering shortages of essential goods such as fuel and sugar. The closure of the three missions came the same day Central Bank of Sri Lanka tightened restrictions on foreign currency remittances by locals. It was gathered that the country said that the closure of the three overseas diplomatic missions was in a bid to save foreign currency reserves, as its Central Bank slaps tighter controls on dollars needed to finance essential imports.

The Ministry of Foreign Affairs said yesterday that the Sri Lankan high commission and consulates in the affected countries would be closed from January as part of the restructuring. According to the ministry, “The restructuring is undertaken with a view to conserving the country’s much-needed foreign reserves and minimising expenditure related to maintenance of Sri Lanka’s missions overseas.” It ordered all commercial banks to hand over a quarter of their dollar earnings to the government, up from 10 per cent. This means banks will have fewer dollars to give to private traders who are importing essential goods.

The Central Bank has appealed for foreign currency, even the loose change of people returning from overseas trips. Earlier this month, ratings agency, Fitch, downgraded Sri Lanka due to mounting fears of a sovereign default on its $26 billion foreign debt. (New Telegraph: Excludes headline)

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