Sri Lanka to introduce new laws to attract investment

In a speech to Parliament, Rajapaksa said that Sri Lanka will introduce new laws to attract investments over the next three years while policies to develop exports, tourism and remittances will be fast-tracked in a bid to rebuild foreign exchange reserves.

There will be a foreign exchange problem in the near future, if we don't control our spending, said Rajapaksa.

There should be major developments in the areas of foreign currency to develop exports, tourism, remittances, information and communication technology. Most of the debt is still left to repay, and the central bank said on Tuesday it had already released US $500 million to repay an international sovereign bond maturing on Tuesday.

Sri Lanka needs to repay debt of US $4 billion in the rest of 2022, with the next tranche of a US $1 billion international sovereign bond maturing in July. At the end of December, official reserves were a little less than US $3.1 billion.

Sri Lanka is negotiating a further US$2.5 billion through credit lines from India and Qatar and the reserve is topped up last week via a US $400 million swap with neighbouring India.

The rating agencies have downgraded Sri Lanka several times in recent months because of concerns of a potential debt default. The government has said it is committed to meeting all debt repayments but has ruled out seeking assistance from the International Monetary Fund IMF Sri Lanka's forex challenge is a symptom of larger structural issues in the economy, so focusing only on improving inflows won't be enough, said Dhananath Fernando, an economic analyst at Colombo-based think tank Advocata.

The government must commit to reforms on state enterprises, tax reforms and market-led adjustments to the rupee to solve its financial crisis, or we will be constantly fire-fighting.