Sri Lanka is en route to eclipse its 2020 Balance of payment deficit in the first seven months of 2021 and record the highest ever BOP deficit.
The seven months leading up to July 2020 saw a BOP deficit of $939 million. The seven months leading up to July 2021, however, have recorded an astonishing $2.755 billion. Note that 2020 in its entirety only saw a BOP deficit of $2.328 billion.
Commentators point out many reasons for this unprecedented rise in the deficit. Heavy Foreign debt associated with a noticeable slowing down of workers remittance and the high liquidity injection of the Central Bank has been pointed out as reasons for the increase in the deficit.
While the government has placed many import restrictions, it still pays a considerable sum to import foreign goods. Despite the limits, the nation’s import bill for January-July 2021 was significantly higher than the same period in 2019, further increasing the gap between the net outflow and inflow.
The Central Bank has doubled down and made several pre-emptive moves to ease the pressure on the currency and foreign assets. These include the increase of key policy rates and doing away with the celling rate on Treasury Bills.
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