The Government of Sri Lanka finds inferences in recent media reports questioning its ability to honour its debt service obligations. The Government notes with dismay such inferences made by certain media to imply that Sri Lanka is at risk of falling into a sovereign debt crisis by comparing Sri Lanka with other sovereigns which are said to be in similar situations. The Government wishes to categorically deny all such baseless claims, and would like to reiterate to all stakeholders that Sri Lanka will duly honour all its debt service obligations in the period ahead.

The trade deficit widened in February 2020 compared to February 2019, as expenditure on imports increased at a faster pace than the increase in earnings from exports. The tourism industry, which recovered faster than expected in the aftermath of the Easter Sunday attacks, was affected again with the outbreak of COVID-19 evolving as a pandemic from late February 2020. Workers’ remittances recorded a year on year growth, while foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded net outflows in February 2020. The Sri Lankan rupee, which remained relatively stable up to the second week of March 2020, depreciated significantly in the latter part of March up to mid-April 2020, but started to stabilise thereafter, and recorded a significant appreciation in the first week of May 2020. Significant implications on the external sector performance are expected from the COVID-19 pandemic from March 2020 onwards, particularly in the areas of merchandise trade, tourism, workers’ remittances and foreign investment.