Sri Lanka will receive a major economic boost if the governments could secure a debt moratorium from China and India, said First Capital Head of Research, Dimantha Mathew.
Sri Lanka in total has to pay back around USD 6 billion of loans to China and this year USD 600 million has to be paid for debt service to China. In contrast Sri Lanka has to pay around USD 1 billion as debt to India and this year the debt service fee would be around USD 180 million.
He said that the government has requested from both countries to defer these payments and if this proposal is accepted Sri Lanka can be in a better financial footing with regard to debt payment.
He said that total debt payment for 2020 is Rs. 2.4 trillion.
“We believe foreign reserves, though currently remains at comfortable levels above the minimum 4 months of imports, foreign repayments start to slowly accelerate especially in the 2H-2020. Thereby, it becomes critical for the Govt. to refinance foreign loans of USD 6 bn, to maintain reserves at the current level. We expect reserves to fall to USD 7 bn by June 2020 due to the debt repayments despite the USD 1 bn Chinese Loan. A large Foreign Loan or Sovereign Bond needs to be raised in order to maintain reserves above the USD 7 bn mark.”
We expect the Debt to GDP to rise to 85% in 2019 while we expect it to marginally dip to 84% in 2020 partly with the acceleration of GDP growth, comparatively lower debt repayments and possible large FDI led by the Port City and Hambantota Economic Zone.”
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