Sri Lanka’s usable foreign reserves are down to $50 million, as the cash-strapped island awaits assistance from the International Monetary Fund, which might take up to six months to come through, Finance Minister Ali Sabry said on Wednesday.
Delivering his first special statement in Parliament as Finance Minister, Mr. Sabry said: “Our liquid reserves, or usable reserves, are less than $50 million,” in the government’s latest admission of the dire situation of the Sri Lankan economy witnessing its worst downturn since Independence in 1948.
The available reserves amount to a fourth of Sri Lanka’s monthly requirement for essential imports. “As of now, the usable liquid reserves are at negligible levels, severely impacting importation of essentials, including fuel, LP gas and pharmaceuticals,” the Minister told Parliament, adding: “I would not hesitate to inform this august Assembly that the government is struggling to find enough foreign exchange to finance these essential imports.”
Admitting to the effect of the Rajapaksa government’s policy choices, especially the wide tax cuts in 2019, the Minister said the revenue loss due to the move amounted to LKR 500 billion (roughly $1.4 billion). There are no “painless solutions” to the crisis, he added.
“It is time for Sri Lanka to establish a broad political consensus on the economic path forward for the country,” he said, even as his government faces harsh public criticism, seen in unceasing street protests across the country.
While Sri Lanka’s crisis has persisted for at least two years, the economy’s downward spiral accelerated this year. Agitating citizens are calling for the resignation of the ruling Rajapaksa brothers, who they hold responsible for the meltdown.
There are no signs of recovery yet. In fact, key foreign exchange-earning sectors such as tourism and exports are flagging a sharp decline in recent months. The country’s crucial tea industry has reported a sharp drop in exports, its lowest in 23 years, according to official figures.
The widely criticised ban on chemical fertilizers and the impact of Russia’s war on Ukraine have contributed to the slash in exports, according to industry representatives.
Official data showed that tea exports in the first quarter of 2022 plunged to 63.7 million kilos, down from 69.8 million kilos during the same period last year. Tourist arrivals fell by nearly half in April, authorities said, as Sri Lanka scrambles for dollars to import essentials, and citizens struggle to cope with soaring prices in the domestic market.
Meanwhile, a political deadlock continues, with both President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa refusing to step down, despite mounting calls from citizens, including owners of large business houses, professionals, artistes, students and worker unions.
The main Opposition party in Parliament Samagi Jana Balawegaya (SJB or United People’s Force) handed over two no-confidence motions, one against the Sri Lanka Podujana Peramuna (SLPP)-led government and another against Mr. Gotabaya on Tuesday. The party has stated that it expects the trust votes to be taken up in the House “at the earliest possible opportunity”, although it remains unclear how the party, with about a fourth of the seats in the 225-member House, will muster the required numbers in the legislature.