Sri Lankan PM beckons Chinese investors as rupee takes a beating
COLOMBO–In an effort to boost the country’s economy, Sri Lanka’s Prime Minister Ranil Wickremesinghe has extended a fresh invitation to Chinese investors to invest in his country.
Addressing a news conference on Wednesday in Davos, Switzerland, at the World Economic Forum, Wickremesinghe appeared to be slowly leaning towards China for the first time since coming to office over a year ago.
He also announced that Sri Lanka will go ahead with the $1.4 billion China-funded Colombo Port City project initiated by former president Mahinda Rajapaksa, which Wickremesinghe had suspended in early 2015 citing corruption allegations.
Wickremesinghe’s invitation to Chinese investors comes just weeks after the Sri Lankan rupee took a heavy beating in late December falling to a record low of 144.10 against the US dollar.
Wickremesinghe, along with his Finance Minister Ravi Karunanayake and International Trade Minister Malik Samarawickrema, is using the World Economic Forum to woo fresh foreign investors into the country, in the wake of Sri Lanka’s lackluster economic performance witnessed over the last year since President Maithripala Sirisena and himself took office in January 2015.
Incidentally, he is the first Sri Lankan political leader to be invited for this year’s World Economic Forum Annual Meeting in over 40 years.
The meeting comes just days after Sri Lanka organized its own economic forum in Colombo in an effort to attract fresh foreign investments into the country. Titled ‘Steering Sri Lanka towards sustainable and inclusive development’, the forum was held on January 7 under the patronage of the Open Society Foundation chairman and billionaire George Soros. It was attended by Sirisena, Wickremesinghe and Nobel Laureate economist Prof Joseph Stieglitz.
In his address, Soros expressed his interest in investing in Sri Lanka, a move likely to boost foreign investor confidence. “I am impressed with this (Sri Lankan) government and what they have achieved in a short period of time. My people connected to the Open Society Foundation, and my investment person are in Sri Lanka to look for investment opportunities,” he said.
Local media reported that Soros is looking at an initial investment of $ 300 million specifically in tourism.
Analysts say if Soros invests in Sri Lanka, it will give the Sirisena-Wickremesinghe administration the much needed boost after their lackluster economic performance in 2015. Although the two promised big foreign investments when they came to power, they failed to deliver due to the political instability of the interim government till August last year.
By the end of 2015, the administration was able to secure foreign direct investments only to the tune of $1.6 billion, which was almost the same as in 2014 during Rajapaksa’s administration.
Meanwhile, with the Sri Lankan rupee not showing signs of recovery anytime soon, the finance minister has assured that the government will take ‘necessary’ steps which will help ease the rupee. Karunanayake also announced that a Belgian investor, whose identity he kept confidential, has come forward to invest $ 1 billion in deposits to help defend the weakening currency, a move criticized by economic experts.
A. Wijewardena, former deputy governor of the Central Bank of Sri Lanka, has warned of a looming economic crisis for Sri Lanka following the government’s decision to allow the rupee to depreciate in the foreign exchange market. “Accordingly, the rupee fell from Rs 131 per US dollar at the beginning of 2015 to Rs 145 per US dollar by the fourth week of December 2015. This is a depreciation of 10% over the year,” he noted.
Wijewardena also warned that the country was heading towards a foreign debt crisis due to lack of foreign exchange reserves. Citing reasons for his claim, he said the data released by the Central Bank stated Sri Lanka must have around $ 4.7 billion to repay as foreign debt along with interest for the next 12 months.
“If we add the average import bill for the country for the next three months, it will come to about another $ 4 billion. So when we add up, the total is much more than the total foreign exchange reserves Sri Lanka has. Because of this reason, it will be an enormous task for the finance minister to source the necessary money to first pay the debt and then for the country as a whole to find more US dollars for our imports,” Wijewardena was quoted as saying in the Nation newspaper.
Munza Mushtaq is a journalist based in Colombo, Sri Lanka. She is the former news editor of two leading Sri Lankan newspapers; The Nation and the Sunday Leader. She writes extensively on Sri Lankan current affairs with special focus on politics, human rights and business issues. She is currently the Colombo-based correspondent for International News Services, the Los Angeles Times and the Nikkei Asian Review.