Sri Lanka central bank chief quits as forex crisis worsens

Professor W.D. Lakshman - Governor of Central Bank

Sri Lanka’s central bank chief resigned Friday over “political and personal issues” as a foreign exchange crisis intensified and the government imposed new import controls.

W.D. Lakshman said he will step down next Tuesday, six weeks ahead of his planned retirement at the age of 80, citing severe “mental stress” over the past 10 days.

Lakshman said he had drawn up President Gotabaya Rajapaksa’s economic policy, but he was unable to implement it fully due to ideological and personal clashes.

“There have been unpleasant reports in the media in the past week to 10 days,” he told reporters.

“There are some political issues, there are some personal issues. Generally, getting things done according to my plan was not easy.”

The announcement came three days after Finance Minister Basil announced that Sri Lanka faced a “dangerous foreign exchange crisis”.

The president declared a state of emergency last week with most private banks running out of foreign currency to finance essential imports. Queues have formed outside stores on most days for sugar and rice.

The government had already banned imports of cars, some cooking oils, spices and other goods in a bid to save currency.

On Thursday, the central bank further tightened restrictions, telling banks not to provide credit to finance imports of mobile phones, consumer goods, tyres and clothing.

Sri Lanka’s coronavirus-hit economy shrank by a record 3.6 percent last year after the key tourism sector shut down.

Official figures show foreign reserves fell to $2.8 billion at the end of July. Sri Lanka has to repay about $2 billion to service its foreign debt during the rest of the year.

International rating agencies have downgraded the country’s credit status, expressing fears it could soon default.