The Sunday Leader

Debt Trap

  • Loan Repayment Dips To US$ 1.8B In 2016; But To Reach US$ 3.9B By 2019

Minister Ravi Karunanayake and Revenue Vs

by Wiraj Silva

Although Sri Lanka’s debt repayment dipped to US$ 1,828 million in 2016 from a hitherto all-time high of US$ 2,031 million in 2015, is slated to double within three years to reach a staggering US$ 3,992 million by 2019, latest projections of the Finance Ministry reveals.

The total debt stock of Sri Lanka has gone up by 233% to Rs.7, 391 billion during the period from 2005 to 2014. The total debt burden of Sri Lanka in 2005 was Rs.2, 222 billion and, within 5 years, it increased up to Rs.4, 590 billion in 2010. In addition there is another Rs 2,000 billion debt obtained by the Public owned Enterprises directly off the balance sheet.

Accordingly, the debt servicing (loan instalments and the interest) to be paid by Sri Lanka to foreign financiers is also increasing constantly. The debt servicing of US$ 1,828 million paid in 2016 will be increased by more than double to US$3,992 million being the highest debt repayment to be paid by Sri Lanka in a year due to colossal borrowings by the previous government. This could be considered as the highest sum of debt servicing  to be repaid by Independent Sri Lanka within a year.

According to Finance Minister Ravi Karunanayake, Sri Lanka is embroiled in a gigantic debt trap. The main reason is that the loans obtained by the previous regime for infrastructure development has not brought any returns on its investments. Further the national revenue and the export earnings constantly came down since 2011 up to year 2014.

Developed countries use their own resources to build mega size infrastructure facilities such as ports and airports. Developing countries tent invite foreign investors  to build such huge projects instead as their economies cannot afford  the high cost of large scale projects. Alternatively,  foreign investors are invited to construct such infrastructure under Build, Operate and Transfer  basis or Build, Own and  Operate  called BOO/BOT basis as  in such an instance the  developing countries need not bear the burden of  debt repayment .

Sri Lanka also in the past developed telecommunication system in the island on BOO/BOT basis. While it enables investors to regain dividends for the investment during a given time and, simultaneously, it does not make developing countries to pass the burden of investment on its poor citizens.

This debt repayment covers only the project loans and the International sovereign bond. The liability on the loan obtained from the IMF and the investment by foreigners on the treasury bills and treasury bonds is to be paid separately.

Its unfortunate that the previous government did not have any strategy to turn such giant loss making entities  in to profit making ventures. Therefore, the current government has made arrangements to convert these credits in to equity  under the Public Private Partnership concept thereby relieving the people from the debt burden. While the government is taking untiring efforts to convert these white elephants into profit making institutions, and generate income and employment for the youth in the country, an opposition group is engaged in sabotaging such efforts charging that the government is attempting to sell off national resources to foreigners. It is high time people thought rationally in response to such misleading remarks made by these rival groups.

At the same time, people should ask the opposition who make an abortive attempt to jeopardize the well being of the people to show some avenues to generate income for the country to repay the massive loans accumulated by 2019 which were obtained by the previous government.

Finance Minister Ravi Karunanayake delivering his 2017 Budget Speech pledged that his government will not leave the debt trap and the  economic war to the future generations.

“No finance minister wants to impose taxes and burden the people. Every finance minister wants to give concessions to the people improving their lives. However, our government inherited the worst economic legacy that anyone could inherit. We are forced to fight a constant battle to relive ourselves from this debt trap we are embroiled in. The guidance I receive from His Excellency the President and the Honorable Prime Minister in this regard is immeasurable. I am reminded of a quote from Field Marshall Sarath Fonseka who said, “I will not leave this War to the next Army Commander” we also wish to assure this  House and our fellow citizens, that our government will not leave this economic war to the future generations.”



1 Comment for “Debt Trap”

  1. dhamma ruwan

    Each government blames the previous one, whilst basking in the luxuries of being in power – expensive vehicles, foreign allowances, travel allowances even food is subsidised by citizen Silva!

    What can Ravi claim, a none existent VW plant a farce for a tire manufacture plant and restarting the port city under another guise, whilst Silva is told of another drought and to be prepared to eat jack leave!

    I voted for this pathetic regime, just as I foolishly voted for the former. The problem is only the figureheads change the remainder of the crooks still exist in the cabinet!

    That’s why lanka will never lift its head up.

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