Recovery in...

However, Moody’s, which estimated the August reserves at nearly US$ 3.0 billion as their definition of reserves excludes, “gold and special drawing rights,” showed they remain, “43 percent lower than at the beginning of the year and around US$ 600 million lower compared to the end of June”.

But Moody’s measures Sri Lanka’s foreign debt maturities at around US$ 4 - 5 billion annually through at least 2025.

Given the size of the foreign debt coming up due annually, the rating agency isn’t convinced if the country could ride through the near to medium term external liquidity pressures with stop-gap measures currently been employed by the government along with the Central Bank.

“However, such inflows are piecemeal and boost FX reserves only temporarily and marginally given the government’s external repayment schedule,” Moody’s said.

While the temporary restrictions on outflows on select imports and outbound remittances help to retain some foreign resources in the country while being effective in the short term, such measures, “could weigh on economic activity and deter investment inflows”, they added.

While the pandemic has weighed on direct inflows and delayed the recovery of tourism inflows, the rating agency expected foreign direct investments to average US$ 1.0 billion in 2021-22 considering the development of Colombo Port City and the exploration of other avenues.

Moody’s also expressed hope that the current vaccination drive would help the country to re-open the economy and its borders to provide a boost to the tourism sector and other non-debt generating inflows from 2022 onwards.