Foreign debt has fallen to a new record under the new government: FM

Sri Lanka’s foreign debt under the new government has decreased while maintaining the foreign reserve at US $ 7.5 billion, the Finance Ministry said today (10).

“Sri Lanka has borrowed only 43 billion rupees in the first half of this year as external debt. The Minister of Finance attributed this lower amount recorded to the efficient manner in which the reforms introduced by the new government to the public administration and the 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 43 billion rupees which is only a 22 percent. But, according to the General Treasury, the total outstanding government debt increased by 8.8 percent to Rs. 7,390 billion by end of 2014 from Rs. 6,793 billion in 2013.

However, the outstanding total debt reached an all time high of Rs 3272 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. Jayewardena.

According to statistic available at the General Treasury the annual debt servicing during the 2015 is estimated to be Rs 1,265 billion. The minister of Finance Mr Ravi Karunanayake said that most of the foreign debt obtained by the previous government was at commercial interest rate up to 8 percent.

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

Meanwhile the minister said that the government revenue in the first six month of the year has gone up by 18 percent 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 the 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.

Even the Standard and Poor’s rating has confirmed Sri Lanka’s ‘B+’ rating with a stable outlook expressing the hope that Sri Lanka’s foreign reserve will grow and the 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 country’s international reserve remain at US $ 7.5 billion,” the Ministry said in a statement.