November 15, 2019
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    February 22, 2019


    Finance Minister Mangala Samaraweera yesterday said the government has repaired the damage to its external sector and rebuilt investor confidence since the ‘October 26 coup’ ended on December 17.“Markets have regained confidence over the last two months, and today, our external borrowing costs have declined by over 200 basis points – assuming US$ 3 billion in fresh borrowings this year that translates into a saving of over Rs. 10.8 billion,” he said at the inaugural meeting of the Breakfast Buzz series organised by the American Chamber of Commerce AmCham.

    “Foreign capital is now flowing back into the economy with Rs. 8 billion inflows into government securities since January; the rupee has also appreciated 2.3% year to date. Therefore, a lot of damage from the coup has been addressed and the economy has again been stabilized.”
    It was his first meeting with the business community after the government was re-instated in December following the 52-day coup. “It took a great deal of hard work to bring us back to stability after the cataclysmic disruptions to the economy during that period.” In the lead up to October 26, “our government had brought stability to an economy that had been adversely affected by successive years of drought that debilitated rural incomes and hurt consumption across the economy. Global oil prices had doubled, and the US Federal reserve was ramping up interest rates, driving capital out of emerging/frontier markets.”
    However, from end October global oil prices began to decline sharply, the Federal Reserve signaled an easing of their stance, and the consumption began to recover in the fourth quarter. In this backdrop, without any disruptions, Sri Lanka would have been able to enjoy a robust boost to the economy and we would have seen a strong uplift in economic performance in 2019. “Unfortunately, Sri Lanka was deprived of the opportunity to benefit from these emerging tailwinds as we got engulfed in a political crisis.”
    The resulting loss in confidence resulted in a surge in capital flight from the debt and equity markets – bleeding over a billion dollars from the country’s hard earned foreign reserves and causing the currency to depreciate at a time when other emerging and frontier market currencies were recovering. Sri Lanka’s credit ratings were downgraded resulting in our external borrowing cost surging into double digit levels just when we had to re-finance US$ 5.9 dollars of external debt repayments in 2019. Tourist arrivals stalled soon after Sri Lanka was adjudged the best travel destination by Lonely Planet and a new campaign had just been launched.
    Talking about the magnitude of the economic damage during the ‘Coup’ he said, the government cash flows were disrupted as the plans to raise capital in the last quarter of 2018 could not materialize and without a budget in November spending plans were also disturbed. “As a result we are still behind target on cash disbursements which would have typically been settled in January.”

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