CB to raise $5 bn in next 3 months
The Central Bank is aiming to raise around US$5 billion within the next two months to meet the debt repayments through a combination of funds from India, loans from Chinese banks and local state banks, and an international sovereign bond issue.
Dr. Indrajit Coomaraswamy, Governor, Central Bank, who said this at a seminar titled “Economy + Sector Review and Outlook 2019” organised by the Ceylon Chamber of Commerce in Colombo on Thursday, also stated that due to the constitutional crisis last year they had to repay $1 billion from their reserves.
He said they are trying to raise a loan of $1 billion from the China Development Bank while preparing to issue an International Sovereign Bond (ISB) which the Cabinet has approved to borrow up to $2 billion. The Central Bank would also likely issue Panda and Samurai bonds in an effort to bolster the reserves, he indicated.
The Governor said that the Sri Lankan economy is faced with problems of fiscal and current account deficit while exports, which was 33 per cent of the GDP in 2000 have now declined to 12.6 percent.
He said they met the IMF (this week) to obtain funds to ease out these problems. The discussions with the IMF centered on two components of the Extended Fund Facility: Revenue announcement based-fiscal consolidation and building up international reserves.
He said that structural reforms are essential to improve exports and investment to reduce debt and improve economic expansion.
He said that the revenue in the ‘80s and ‘90s was at 20 per cent of the GDP but today it has dropped to 11.9 per cent and the overall expenditure runs to around 20 per cent. The quality of expenditure, he said has to be improved. The fiscal deficit is about 3 to 3.5 per cent and if the fiscal deficit is in that range they could finance it through a mixture of domestic and external financing which does not put pressure in terms of the debt burden of the country, Dr. Coomaraswamy pointed out.
He said that what is more worrying is that 83 per cent of the taxation is connected to indirect services. “We have one of the most regressive and unfair tax systems in the world. So I always find a bit of a problem here when people complain about tax rates. I compare my UK taxes and Sri Lanka. We are not a heavily-taxed country. We pay little taxes,” he said.
He said that the budget deficit and revenue has to reach to the level they had in the past (in a positive sense) where earlier a lot of revenue came from three cash crops – tea, rubber and coconut which would have been replaced now with the new growing sectors.