Rupee depreciation has made recently borrowed US $ 1bn more expensive: Cabraal

Former Central Bank Governor Ajith Nivard Cabraal yesterday argued that the depreciation of the rupee during the last five days has increased the repayment commitment of the recently borrowed US $ 1 billion to over US $ 1.1 billion. 

The Central Bank on October 17 announced that it had secured a US $ 1 billion term facility from China Development Bank at an interest rate linked to six-month US dollar LIBOR, with a grace period of three years.

The monetary authority also said as a result, the official foreign reserves would increase by US $ 1 billion.

However, despite the inflow of dollars, the rupee depreciated from Rs.172.28 against the US dollar in the morning of October 17 to Rs.173.38 by yesterday, a significant depreciation of Rs.1.10 in five days. 

“This shows that the rupee repayment commitment on the loan of US $ 1,000 million obtained just last Wednesday, has now already increased by Rs.1,100 million, by today (October 22),” Cabraal argued in a brief statement.  

“Who is taking responsibility for these decisions to add to the forex borrowings, knowing fully well that the rupee is currently on a downward spiral and further forex borrowing is likely to plunge the Sri Lankan economy towards ruin?” he questioned. 

The government however charges the previous regime of President Mahindra Rajapaksa, in which Cabraal was the Central Bank Governor, for borrowing recklessly at near-commercial rates for white elephant projects that had yielded no return. 

Sri Lanka’s external debt repayments from 2019 to 2022 are estimated at US $ 14.5 billion. Next year, the government has to repay US $ 4.1 billion in foreign debt.