$1bln bond sale to repay foreign borrowings, says Harsha
View(s):Given the IMF restrictions on tapping the market in 2013 and the failure of the plan to push DFCC and NDB to borrow 10 year money totalling US$ 500 million, the Government had no choice but to raise $1 billion from a new bond to meet increasing foreign curency repayments, Economic expert and UNP Parliamentarian Dr. Harsha de Silva said.
In fact NDB could not raise a single dollar while DFCC stopped at a mere $100 million given the exorbitant rate close to 10 per cent it had to pay and that too for just 5 years. However, the Government pushed the defenseless state-owned NSB for a 5 year $750 million bond in September at an unprecedented rate of almost 9 per cent, he said.
The question is why are we borrowing so much? he asked. Is it for ‘development efforts’ as commonly touted, or is it for repayment of maturing debt?
“Perhaps many do not know that the hundreds of millions of dollars the Government raises regularly using what are called ‘Development Bonds’ are almost completely utilized for debt repayment and not for ‘development’,” he added.
Even the borrowings for infrastructure projects have now come in for sharp criticism, take for example the Norochcholai coal power project which has cost some $1.4 billion including hundreds of millions of dollars in alleged commissions and bribes, the Mattala airport, the Hambantota port, the international convention centre or the Suriyawewa cricket stadium.
‘They’ are all bleeding money with hardly any return to even make the interest payment; some as high as 6.3 per cent in USD plus fees, he added.
Dr. De Silva expressed the view that the economy is in fact becoming increasingly vulnerable to a foreign debt crisis. Vulnerability alone does not create a crisis and an economy could continue to move forward with increasing debt given official reassurances that all is well. However even a small trigger can cause a crisis to unfold.
Many ex-post studies on the Asian financial crisis document that in the Thai case the trigger was a sudden revelation that Bank of Thailand had been manipulating figures on foreign reserve for a number of years. The Greek case is no different; but in this case also growth and fiscal figures were doctored. Ironically questions are now being raised publicly on the credibility of data put out by various state agencies in Sri Lanka, he said.
Perhaps unknown to those who are convinced by the regular marketing pitches by one or two officials that things could not be better, the fact is that Sri Lanka is not only depending more and more on foreign commercial borrowings for its survival, but also heavily dependent on or two large US investors. This makes the potential for a sudden crisis even higher, he pointed out.
| CB and Ponzi schemes
Why did the Central Bank let a ‘Ponzi Scheme’ accept public deposits and the Securities and Exchange Commission (SEC) allow it float an IPO, asked economist and MP Harsha de Silva. “There is a lot of talk about mergers in the NBFI sector these days, but, so far there have been absolute silence on an important question I raised in Parliament a month ago during the Finance Ministry budget. That is why the Central Bank allowed a particular finance company, now technically bankrupt with thousands of depositors unable to get their money back, to continue to advertise and accept public deposits and also why the SEC allowed an IPO just two months after CB’s NBFI supervision department called it a ‘Ponzi scheme’ upon an on-site investigation,” he noted. “Quite incredibly violations of the law and regulations by this widely advertised finance company ran into more than two dozen pages. These included doctoring of accounts, falsifying transactions, fraudulent activity by directors and even the disgraceful act of directors withdrawing funds from the company when it was unable to meet depositor claims. The public are awaiting answers from the Central Bank and the SEC,” he said. |