Former Deputy Governor of the Central Bank of Sri Lanka W A Wijewardena last week warned that Sri Lanka’s situation of the external debt was ‘critical’ and the island is now heading for a foreign exchange crisis coupled by the deceleration of the economic growth. Addressing the Sri Lanka Economic Forum 2016, the veteran banker said that although the government would find it difficult to pay its foreign (external) debt due to the lack of foreign exchange reserves, paying off its domestic debt would not be a problem as it still had the space to print money.

“In the past, we were fortunately having a high economic growth coming basically from the increases in the services sector and that particular bonus is no more there for us. And as a result, with the decline in the economic growth as well as the oncoming of the external sector crisis, I feel that we are heading towards a crisis situation today,” Wijewardena cautioned.

According to data released by the Central Bank recently, Sri Lanka must have US$4.7 billion to repay its foreign debt for the next 12 months and also pay interest on that, he said.

“If we add the average import bill for the country for the next three months, it will come to about another US$ 4 billion. So when we add up the total is much more than the total foreign exchange reserves we have. Because of this reason, it will be an enormous task for the Minister of Finance to find money to first pay the debt and then for the country as a whole to find US Dollars to pay for our imports,” Wijewardena said.