Several Opposition parliamentarians said in Parliament that Sri Lanka’s net foreign reserves had plunged to an all-time low of $ 1.2 billion and warned of the several consequences. Sri Lanka also has gold reserves of $ 300 million that can be liquidated in a crisis.
Ironically, the Government members did not refute the Opposition claim of record low reserves, which amounts to less than one month’s ($ 1.3 billion) worth of imports, which is said is the all-time low. When President Gotabaya Rajapaksa came to power two years ago, foreign reserves had amounted to over $ 7 billion.
Banker-turned-politician Eran Wickramaratne, one of the few gentlemen politicians in Parliament, said this week that the forex crisis would worsen the shortage of essential food items, aside from them being super expensive. He also predicted a fuel shortage leading to power cuts and warned of the country falling into a period of darkness. He further said the Government should tell the public of the precarious situation well in advance, then at least manufacturers and businesses could prepare adequately to face the consequences.
So where did we fail? The external borrowings of Sri Lanka is around $ 36 billion (source ERD). Debt to GDP in 2020 was 101.24% and has risen to 104% by June 2021 (CBSL). It is therefore important to find out how the borrowed money was put to use and the returns on these investments to understand what caused Sri Lanka’s serious financial plight. All governments since 2000 are responsible for this current situation. Some more and some to a lesser degree.