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Sri Lanka May Need Bailout as War Debt, Currency Drain Reserves
bloomberg,
feb 27.
Feb. 27 (Bloomberg) -- Sri Lanka may need a bailout from international donors to help pay its debts as the island’s 26- year civil war draws to a close.
Since August, the South Asian nation has spent half its foreign reserves, now $1.7 billion, on supporting its currency, paying debt and buying imports. That doesn’t leave much after the government shells out another $900 million due in 2009. The reserves aren’t getting replenished as the ailing world economy pummels exports and overseas investors flee emerging markets.
President Mahinda Rajapaksa’s government is unwilling to turn to the International Monetary Fund, which requires austerity measures in return for loans. Securing financing from other countries may be challenging for a nation whose credit rating from Standard & Poor’s is the lowest apart from those of Bolivia, Pakistan, Grenada, Argentina and Lebanon.
“Sri Lankan authorities have to act fast to beef up the country’s reserves,” said Ashok Parameswaran, senior emerging markets analyst at Invesco Inc. in New York. “Otherwise, they may have to devalue their currency significantly.”
Since December, countries including Russia, Vietnam and Kazakhstan have weakened their currencies rather than use reserves to prop them up. That has made imports costlier, reducing demand for goods from overseas.
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Published: Thu Feb 26 22:22:53 EST 2009
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