P’ment passes Liability Management Act

By Ashwin Hemmathagama – Our Lobby Correspondent

Parliament yesterday passed legislation to allow the Government to borrow Rs. 310 billion to assist in debt management and currency management under the Active Liability Management Act of 2018 (ALMA).

According to Minister of Finance and Mass Media Mangala Samaraweera, the present Government has shouldered the debts of the Rajapaksa regime, where more than 70% of the debt servicing scheduled for the next six years from 2019-2025 is what was borrowed by the previous Government.

Listing the debt servicing schedule in Parliament, the Minister said: “For example, 77% of the share of our foreign debt service in 2019 and 2020 will be on pre-January 2015 borrowings.

 We will have to service a debt of $ 2,845 billion this year, of which 63% is debts taken by Rajapaksa regime. In 2019, we have to service $ 4,285 billion of which 77% was taken by Rajapaksa regime.

“In 2020, there is $ 3,768 billion in debts to be serviced and 77% of it is Rajapaksa-time debts. In 2021, we again have to service $ 3,441 billion of which 83% is Rajapaksa-time debts. Then in 2022, we have pay $ 3,840 billion of which 71% is Mahinda Rajapaksa’s debts. In 2023, we have to pay $ 2,250 billion and 71% of it is Rajapaksa-time debts. In 2024, we have to service $ 2,218 billion of which 69% is Rajapaksa’s debts. In 2025, we have to service $ 4,275 billion of which 33% will be Rajapaksa time debts.”

Despite the diverse obstacles the Government is facing, Minister Samaraweera assured the House that the debt crisis would be taken care of effectively and efficiently without burdening the public at large. 

“Of course, the debt issue in hand is a legacy of pre-2015, the mismanagement, and therefore let me begin by underlining the colossal burden that was left on our shoulders. This Government took over a very fragile and structurally-imbalanced economy. The economy was in shambles when our Government took over in 2015. Economic growth in the post-war years was dominated by a foreign debt-funded construction boom. The then Government went on spending on infrastructure and investments, many of which yielded little or no return,” he said.

Samaraweera pointed out the former Government during its tenure expanded its unproductive expenditure in an irresponsible manner without proper attention to developing revenue sources to meet such expenditure. As a result, they developed a “fiscal time-bomb” which the Government is now in the process of defusing. 

“We inherited a fiscal time-bomb and for the last three years we have been in the process of defusing the bomb successfully. Sovereign bonds issued during 2010-2014 amounting to $ 4.5 billion will be maturing in 2019/2020. In dollar terms our annual interest payments on the sovereign bonds would exceed $ 300 million. Much of the increase in borrowing by the previous Government from expensive external foreign debts requires investment in production through assets,” he added.

“Unfortunately, no productive investments were mechanised, instead draining our resources to utter wastage. Fortunately for this country, in 2015 the direction of that disastrous path took a different direction and now for the first time in history, we have a clear approach to manage our debts. Therefore, we are fully cognisant of our outstanding debts liabilities, denominated in local and foreign currencies, in view of the necessity for institutionalising a legal framework for managing the country’s public debt profile in a prudent manner that brings debt sustainability and macro-economic stability,” the Minister explained.