• SL disbursed $ 968.8 m in foreign funds so far this year for projects and imports
• $ 968.1 m disbursed for loans, $ 0.7 m disbursed for grants
• Majority of loans disbursed from India (39%), ADB (37%) and China (7%)
• Highest funds for power and energy, roads and bridges, health and social welfare
• Total undisbursed balance as of 30 April 2022 stands at $ 8,054.3 m

By Maheesha Mudugamuwa Sri Lanka has disbursed a total of $ 968.8 million in foreign funds to finance high priority projects and to address financial needs such as importing essentials in the first quarter of this year, the Ministry of Finance stated.  Out of the total foreign financing disbursements made during the period from 1 January to 30 April, $ 968.1 million had been disbursed as loans while $ 0.7 million had been disbursed by way of grants, the Mid-Year Fiscal Position Report of 2022 of the Ministry of Finance, Economic Stabilisation, and National Policies revealed.  A majority of the disbursements were from the loan agreements signed with India, which is almost 39%, followed by the Asian Development Bank (ADB) (37%), and China (7%).  According to the report, a majority of the disbursements were for projects implemented under the power and energy sector, accounting for almost 41.57% of the total disbursements, followed by the roads and bridges sector at 21.5%, health and social welfare at 10.97%, water supply and sanitation sector at 6.32%, irrigation at 6.07%, ground transport at 5.5%, and education sector at 3.13%.  As of 30 April, Sri Lanka had a total undisbursed balance of $ 8,054.3 million foreign financing available from already-committed loans that are to be utilised in the next three to five years. Among the undisbursed balance, India has the majority of the balance, followed by the ADB, World Bank (WB), China, and Japan respectively.  In addition, from January to April, the Government has made arrangements to mobilise foreign financing worth $ 1,550.5 million by entering into four agreements with foreign development partners and lending agencies including $ 1,500 million of export credit facilities extended by the EXIM Bank and State Bank of India for import of essential commodities, $ 32.9 million extended by Kuwait to be utilised for the construction and equipping of the Faculty of Medicine at the University of Moratuwa, and $ 17.6 million extended by Germany for the establishment of a vocational training centre in Matara to support the public investment programme.  Government approach When contacted by The Sunday Morning, Treasury Deputy Secretary R.M.P. Rathnayake said the Government had already utilised a substantial amount of foreign fund allocations through the already-committed projects.  He said the Government had prioritised the projects, and the funds of projects that were not urgent had been utilised for essential requirements due to the foreign exchange crisis in the country. Referring to the foreign funds received by the country, Rathnayake said: “We have received several funds from several institutions. We have not received funds from the WB. From India we received credit lines and we are waiting for the approval of the requested $ 500 million too.”  Sri Lanka is currently experiencing one of the worst economic crises since independence, mainly due to the shortage of foreign exchange. As a result of the foreign exchange shortage, there has been a shortfall in the supply of a number of essentials such as fuel, gas, and essential commodities. Inflation has reached a record high during the past several months and the prices of all essential items have seen a dramatic increase.  As a measure to overcome the existing economic crisis, the Government is looking at the possibility of getting assistance from the International Monetary Fund (IMF) in designing an economic recovery programme and for emergency financial assistance.  Furthermore, the Government has taken a policy decision to temporarily suspend servicing external debt of bilateral and commercial creditors for an interim period commencing from 12 April 2022 pending an orderly and consensual restructuring of those obligations in a manner consistent with the IMF programme. Indian assistance India was the first to respond to Sri Lanka’s desperate calls for foreign aid to tackle its crippling economy. Accordingly, India provided assistance to Sri Lanka under three main categories – economic and foreign exchange assistance, humanitarian assistance, and maritime assistance – during the past few months.  As per the statistics available with the Indian High Commission (IHC), India has provided a currency swap of $ 400 million in January between the Central Bank of Sri Lanka (CBSL) and Reserve Bank of India (RBI), a $ 500 million Line of Credit (LOC) for purchase of petroleum products in February, a $ 1 billion concessional credit facility in March towards the purchase of essential items such as food, medicine, etc., and deferment by RBI of about $ 1.8 billion payment liabilities by CBSL under the Asian Clearing Union mechanism.  According to the Indian High Commission, the $ 500 million LOC given for fuel has been fully used up by Sri Lanka and $ 200 million from the $ 1 billion for fuel has also been utilised.  In addition to the financial support, India has donated 100,000 Rapid Antigen Test (RAT) kits for Covid-19 in February and more than 26 tonnes of drugs and other medical supplies have been provided to the Peradeniya Teaching Hospital, Jaffna Teaching Hospital, Hambantota General Hospital, and Ambulance Service 1990 this year to meet the acute shortage of medicines. The value of these medicines is estimated at more than Rs. 250 million.  Further, India has also delivered a consignment of kerosene for the use of fishermen in the Northern Province of Sri Lanka to enable their livelihoods, 40,000 MT of rice, 500 MT of milk powder, and more than 100 MT of medicines to their brethren in Sri Lanka.  The total value of these goods is approximately $ 22 million. Worker remittances Tourism and worker remittances have been the two major sources of foreign exchange earnings of Sri Lanka. Tourism was badly affected by the Covid pandemic and therefore worker remittances were a key pillar of Sri Lanka’s foreign currency earnings, providing substantial support against the widening trade deficit. Meanwhile, as mentioned in the Special Audit Report on Financial Management and Public Debt Control in Sri Lanka 2018-2022, the remittance of foreign service employees, which was $ 7,103.93 million in 2020, had declined to $ 5,491.46 million in 2021. Further, as per the daily exchange rates of the Central Bank of Sri Lanka, it had taken action to maintain the exchange rate of the US Dollar at a fixed value (Rs. 202.9992) from 7 September 2021 to 7 March 2022 and as such, it was observed that the receipt of foreign remittances had significantly decreased during the said period.  Moreover, it was observed that only $ 2,049.7 million had been received for the period of seven months from September 2021 to March 2022 compared to the sum of $ 3,548.9 million received for the period of seven months from February 2021 to August 2021. Disbursements of $ 1 b Indian LOC As per the Finance Ministry, under the $ 1 billion Line of Credit (LOC), a total of $ 80.2 million has been allocated for white sugar importation among 48 importers while $ 19.3 million has been approved for animal feed importation as of June. Further, 15 importers have been approved for the importation of dried chillies, totaling $ 17.8 million, and another $ 17.02 million has been allocated for red lentil funding. Under the category of raw materials, $ 8.5 million has been authorised for packing and plastic-related imports, while textile- and apparel-related imports worth approximately $ 8 million were permitted. As of now, another $ 8 million has been authorised for paper and printing-related imports and $ 6 million has been allocated for cement imports.  The allocation of pharmaceutical imports has been distributed among four subcategories. The  State Pharmaceuticals Corporation (SPC) has been authorised to import products worth $ 30.5 million, while private sector suppliers have been authorised to purchase items worth $ 55 million to date, according to Finance Ministry statistics. Economic status The gross value of official reserves (foreign reserves) of Sri Lanka, which stood at $ 9,936 million as at April 2018, dropped to less than $ 2,000 million by March 2022 due to the impact of the ongoing crises. According to Annual Reports of the Ministry of Finance and the Central Bank of Sri Lanka, Government debt, which was Rs. 12,030.5 billion as at 31 December 2018, had gradually increased up to Rs. 13,031.5 billion as at 31 December 2019, Rs. 15,117.2 billion as at 31 December 2020, and Rs. 17,589.3 billion as at 31 December 2021.