To boost the country’s foreign reserves the government has sold over half its gold reserves, worth an estimated $382.2 million at the end of November.
Its value plummeted by half by the end of December reaching a value of $175.3 million.
Over the next 12 months, Sri Lanka is required to pay an estimated US$7.3 billion in domestic and foreign loans, including a US$500m international sovereign bond repayment in January. However, as of November, available foreign currency reserves were just $1.6 billion.
Responding to the crisis the government has requested credit lines and currency swaps for neighbouring countries such as India, China and Bangladesh, as well as loans to purchase petroleum from Oman. In settling their oil debts with Iran, they are requesting to pay Iran with tea, sending them $5m worth of tea every month to save currency.
The Guardian warns that “these loans provide only short-term relief and have to be paid back quickly at high-interest rates, adding to Sri Lanka’s debt load”.