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Spotlight: Econ Op-eds in Summary (Week ended 29th September '21)



1. Sri Lanka’s foreign debt payment challenges in ’22

By: Dinesh Weerakkody

  • In      July, Sri Lanka met its repayment obligation of US$ 1 bn keeping intact      its reputation for honouring sovereign debt. Despite this, several      downgrades had resulted in pushing the cost of dollar debt higher. Thus,      most of the debt is currently financed locally and this is set to rise      further given the prolonging of the pandemic with the country unlikely to      revert to pre-pandemic levels till mid-2023.

  • One      of the main challenges moving forward is the growing import bill, with      analysts expecting a widening of the trade deficit given a surge in      pharmaceutical and oil imports. The government faces strong external      sector pressure in 2022, with multiple sovereign bond repayments falling next      year with certain analysts estimating debt service obligations to be as      large as $7 bn.

  • Although      Sri Lanka has received multiple swaps in the past, some of these swaps may      not be convertible to USD, adding further pressure to the country’s      reserve position. As it is unlikely that the country will be granted a      debt cancellation, it must seek debt moratoriums which would offer      concessional financing and other forms of fiscal management support to      help navigate the way forward.

For the full article – Refer Daily FT

2. GSP+ withdrawal How will it impact Sri Lanka’s economy

By Asanka Wijesinghe and Eleesha Munasinghe

  • Sri      Lanka’s preferential access to the European Union (EU) market faces fresh      challenges after the European Parliament’s special resolution adopted in      June 2021, calling for an assessment on “whether there is sufficient      reason, as a last resort, to initiate a procedure for the temporary      withdrawal of Sri Lanka’s GSP+ status.”

  • A      possible withdrawal of GSP + will reduce export income by around US$ 627      mn, with the apparel, tobacco, seafood and rubber sectors being affected      the most. While the apparel sector is relatively resilient to a loss of      preference as it’s utilization ration was low in 2019, the recovering      seafood sector could face much larger blow.

  • Even      though less dependence on the EU market and more diversification is      needed, Sri Lanka should work to secure the GSP+ resolving the current      political issues and focus on fully utilising GSP+ preference in the short      run. In the long run, as GSP+ is contingent upon income level, Sri Lanka      will lose it someday, and as such, Sri Lanka should take steps to enter      into reciprocal trade agreements with the EU and other high-end markets.

For the full article – Refer Daily FT

(Compiled by: Promodhya Abeysekara, Malitha Goonerathne & Mariyan Perera)

Disclaimer: This information has been compiled from sources believed to be reliable but Frontier Research Private Limited does not warrant its completeness or accuracy. The bullet points provided for each summarised opinion article is written by Frontier Research and has no connection to the respective author. Furthermore, the information contained in these reports/emails are confidential and should not be shared publicly. Disclosure, copying and distribution is strictly prohibited.

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