Central Bank Governor Dr. Indrajit Coomaraswamy said that the incoming president and government will be faced with the prospect of needing to borrow up to US$3 billion from international markets in order to service its debt obligations.

Dr. Coomaraswamy noted that the country has to face severe austerity if mismanagement of the economy results in its ability to borrow urgent funds from markets.

He made these remarks speaking at ‘Transforming Sri Lanka Forum – Empowering the Game-Changers’ organised by the Pathfinder Foundation in Colombo last Friday (1).

“Now that we are an upper middle income country, we are exposed to rating agencies and international capital markets. In the foreseeable future we are going to have some kind of relationship with the IMF. We may not borrow money from them (IMF) but we will have some kind of relationship because in the next three to five years Sri Lanka has to borrow $ 3 billion per year from the market to be able to meet economic obligations and still maintain a reasonable level of imports.”

“So, whoever is in power that is going to be a binding constraint. There is a clear path that one has to follow and if one deviates then we won’t be able to raise that money and there will be severe austerity in terms of expenditure, squeeze of domestic consumption, import compression and all that,” Dr. Coomaraswamy said.