External borrowing by new Govt. only Rs. 43 b in 1H says Finance Ministry

Sri Lanka’s foreign debt under the new Government has decreased while foreign reserves have been maintained at $ 7.5 billion. Sri Lanka has borrowed only Rs. 43 billion in the first half of this year as external debt.

Minister of Finance Ravi Karunanayake attributed this lower amount recorded to the efficient manner in which reforms were introduced by the new Government in relation to public administration and financial management.

As envisaged in the Budget 2015, the approved amount of commercial loans to be taken in this year is Rs. 195 billion, of which the Government has so far obtained Rs. 43 billion, which is only 22%.However, according to the General Treasury, the total outstanding Government debt increased by 8.8% to Rs. 7,390 billion by end of 2014 from Rs. 6,793 billion in 2013.

The outstanding total debt reached an all-time high of Rs. 3,272 billion in June 2014 under the previous Government and the lowest recorded was Rs. 70 billion in 1986 under the then Government of President J.R. Jayewardene.

According to statistics available at the General Treasury, annual debt servicing during the 2015 is estimated to be Rs. 1,265 billion. Finance Minister Karunanayake said that most of the foreign debt obtained by the previous Government was at commercial interest rate up to 8%.

The Minister said that the new Government had retired some of these debts which were obtained at higher interest rates and obtained new debt under the lower rate of interest. As a result theGovernment’s debt servicing interest rate to GDP ratio has come down to 3.5% from the earlier rate of 5%.

Meanwhile the Minister said that Government revenue in the first six months of the year had gone up by 18% to Rs. 703 billion when compared with the corresponding period in 2014. The revenue reported in the first six months of 2014 was Rs. 596 billion. The increase in Government revenue and the curtailing of extravagance expenditures of the previous Government with efficient financial management by the new Government led to managing the public debt efficiently under the new Government.

Standard and Poor’s confirmed Sri Lanka’s ‘B+’ rating with a Stable Outlook expressing the hope that Sri Lanka’s foreign reserves will grow and external debt will fall in the next three years as the risks associated with the external settings are mitigated by growing foreign reserve. As at present the country’s international reserve remain at $ 7.5 billion.