By EuAsiaNews,
Brussels : The Belgian Export Credit Agency (ONDD) announced Tuesday that cover terms for medium and long-term export transactions on Sri Lanka have become stricter.
From now on, cover of such transactions will be limited to transactions concluded with the private sector, said
ONDD in a statement.
In view of the risk for public debt rescheduling it advises to no longer cover credit operations with the
Sri Lankan public debtor. Also, the ceiling has been lowered from 900 million euro to 750 mn euro.
The top Belgian insurer noted that politically and economically, Sri Lanka is performing quite differently.
After fighting an intense and violent war since 2008, Colombo now has the prospect of complete military victory, which will put an end to the occupation of the north and northwest of the island by the Tamil Tigers.
By contrast, the global economic crisis is spreading rapidly, affecting substantial remittances from Singhalese expats, export-oriented industries like the important textiles sector and FDI flows, it said.
Taking into account expansionist macro-economic policies, budget and current account imbalances have deteriorated to an extent that the sustainability of public finances, already aggravated by heavy interest charges on mounting public debt, is threatened and a balance-of- payment-crisis is expected, warned ONDD.
Sri Lanka could now have no other option but to solicit help from the IMF in order to meet its growing borrowing requirements.
Especially in the light of the economic slowdown, Sri Lanka’s solvency and external liquidity is deteriorating rapidly, with the country having to take up more expensive commercial loans, the rupee devaluating and the sharp decline of foreign currency reserves, it said.
The result is a higher default risk in terms of external debt and a possible rescheduling of public debts, concluded the statement.