Colombo Stock Exchange was ordered to be shut for five days by Sri Lankan’s securities regulator days after the government announced the suspension of debt repayments amid its worst economic crisis.  

In a statement on Friday, the Securities and Exchange Commission of Sri Lanka said, “It would be in the best interests of investors as well as other market participants if they are afforded an opportunity to have more clarity and understanding of the economic conditions presently prevalent, in order for them to make informed investment decisions.”

Since 2020, after the pandemic began, Sri Lanka’s central bank has printed over two trillion rupees, in a move to keep interest rates low. This, however, resulted in a balance of payment crisis and also drove up inflation and stock prices (asset price inflation).

Stocks have stumbled in recent weeks as a monetary meltdown began and attempts are underway to arrest the slide, reported Economy Next.

Economists and analysts had warned that Sri Lanka was heading for dollar debt default and monetary meltdown and fuel shortages after ‘flexible’ inflation targeting, a pseudo domestic anchor with a reserve collecting peg, began to trigger external instability and growth shocks.

Currently, the country of 20 million people has been running short of fuel, food, and other essentials. The country’s forex isn’t enough to pay for essential imports let alone other raw materials needed for domestic industries.

Next week, Sri Lanka Finance Minister Ali Sabry is scheduled to start talks with the International Monetary Fund (IMF) for assistance. 

“We will need about four billion dollars to manage our reserves through the rest of the year. We are hoping to get support from the IMF, World Bank, and bilateral partners such as India and China,” he said in a recent interview with The Hindu.

(SAM)