New Sri Lanka central bank boss calls monetary policy meet on Friday

Sri Lanka’s new central bank governor will hold a monetary policy meeting on Friday, a day after he takes office, a source told Reuters, as the government struggles with an economic crisis. The crisis touched off political chaos this week when the entire cabinet of President Gotabaya Rajapaksa quit, followed by the resignation of the central bank chief, Ajith Nivard Cabraal.

Nandalal Weerasinghe, a former senior deputy governor of the Central Bank of Sri Lanka who has worked with the IMF, will replace Cabraal on Thursday.

With inflation racing to the highest in a decade, hefty interest rate hikes may be looming, adding to pressure on the reeling economy and fanning further unrest.

An analyst said the central bank was expected to hike key interest rates by 300-400 basis points (bps) —following a 100 bps increase in early March — to tame inflation that hit 18.7 per cent in March.

Rajapaksa’s team, however, is still hunting for a finance minister after Ali Sabry quit on Tuesday, a day after his appointment. A source said that despite appeals to a range of officials and top private sector professionals, the president and his close aides have failed to find a replacement.

Lanka president names advisors for debt crisis

Sri Lanka’s president named an advisory panel to help resolve a growing debt crisis and engage with lenders, including the International Monetary Fund, signalling he remained in control despite his government losing its parliamentary majority and calls for his resignation.

Gotabaya Rajapaksa used his sweeping executive powers to name the group made up of economists and fiscal experts to advise him.

Lanka Faces Wall of Debt Payments

Sri Lanka faces $8.6-billion worth of debt payments due this year as the implosion of its economy and worsening political turmoil cast doubt on its ability to pay any of it. Among them, the South Asian country needs to honour a combined $2.2 billion of principal and interest payments for dollar-denominated bonds and loans, with the number rising to about $2.7 billion annually in both 2023 and 2024, available data compiled by Bloomberg shows.

Global investors are scrutinising the island nation’s ability to weather its debt challenge after dwindling foreign reserves prompted a slump in its currency —with surging living costs and power cuts triggering big protests. Sri Lanka had about $2.3 billion of foreign reserves in February. It faces an imminent test of global investor confidence on April 18, when $36 million in interest on a 2023 dollar bond and $42.2 million on a 2028 note both come due, data shows. A $1 billion sovereign bond maturing July 25 presents a bigger challenge. BLOOMBERG