COLOMBO, September 10, 2024 – Sri Lanka has repaid $450 million to the Reserve Bank of India (RBI) in the first month of its financial year as part of ongoing efforts to manage its external debt. However, in a move to stabilize its foreign reserves and address its economic challenges, the Central Bank of Sri Lanka (CBSL) also secured a $200 million loan from the Development Bank.
By June 2024, Sri Lanka’s debt to the RBI stood at a significant $2.01 billion. In addition to these loan repayments, the RBI has provided Sri Lanka with a foreign exchange facility to support the country through its financial crisis. The loan facility aims to alleviate immediate pressures on foreign reserves, which have been stretched due to mounting debt and economic struggles.
This financial maneuver comes as part of a broader effort by the government under President Ranil Wickremesinghe, who also heads the Ministry of Finance, to stabilize the country’s economy. Under the second sub-programme of the Stability and Promotion Program of the Financial Sector, the government is focusing on both debt repayment and securing new financial assistance to maintain fiscal stability.
While the repayment of $450 million signals Sri Lanka’s commitment to honoring its debt obligations, the additional $200 million loan reflects the nation’s continued dependence on external financial support to bridge fiscal gaps. This financial balancing act is critical as Sri Lanka navigates its way through its ongoing economic recovery efforts.
Experts suggest that the approval of the Development Bank loan is part of a broader strategy to address Sri Lanka’s foreign currency shortages and improve its economic standing. However, the country’s growing debt, particularly to India, remains a significant concern as policymakers work to find long-term solutions to economic resilience.
President Wickremesinghe’s administration is also actively seeking to promote financial sector reforms under the Stability and Promotion Program, aimed at strengthening economic governance and enhancing investor confidence.
