Sri Lanka plans to introduce new policies to attract investments while developing tourism and exports to rebuild forex reserves.
President Gotabaya Rajapaksa said on Tuesday that a forex shortage was inevitable in the nation.
Rajapaksa added that if the country fails to control its spending, it will soon face a foreign exchange problem.
He said that there should be a significant development in foreign currency to develop tourism, remittances, exports, and information and communication technology.
The country is struggling with its debt. Even though the central bank reported that the government had paid several hundred million bonds this week, more payments are unpaid.
In 2022, Sri Lanka must repay its debt worth $5 billion. Official reserves stood at $3.2 billion in December.
Reserves topped up last week via a $500 million swap with neighboring India. At the same time, the nation is arranging a further $2.6 billion through credit sequences from Qatar and India.
However, rating agencies have devalued Sri Lanka several times recently over potential debt crisis concerns. Its government said it would meet all debt repayments but reconsidered pursuing assistance from the International Monetary Fund.
An economic analyst, Dhananath Fernando, commented on the situation. He said that Sri Lanka’s forex challenge is a sign of bigger economic structural issues. Therefore, he added that focusing only on enhancing inflows will not be sufficient.
The government has to commit to more extensive reforms on tax, state enterprises, and adjustments to the rupee. He explained that all these changes are necessary to resolve the financial crisis.
Renewables in focus in Sri Lanka
Gotabaya also said the country would focus on renewables in its energy mix over the next two years while fulfilling other plans. The country has drafted plans to create 7,000 small solar power plants and 150 MW hydropower. He said that the main problem in the country is high energy costs.