Government’s total public debt sky-high by 71%
Sri Lanka government’s total debt has skyrocketed to unmanageable proportions by an increase of 71 per cent since the current administration came into power in 2015, Finance Ministry statistics showed.
The present administration has to borrow money since 2016 to repay the massive loans taken by the previous regime, Treasury accounts revealed.
The most significant borrowing in 2013 was the US$750 million obtained from international markets at the highest ever interest rate of 8.9 per cent at a time when the global benchmark rate for that type of loan was 1.3 per cent, a senior official said.
According to Finance Ministry data, public debt has increased to over Rs. 8000 billion in 2015 from Rs.4000 billion in 2009.
While the government went on a borrowing spree on international capital markets, government revenue nose-dived.
In 2005, Sri Lanka’s tax-to-GDP ratio was 13.7 per cent. By 2014, it was 10.1 per cent, one of the lowest in the world.
As a result, expenditure necessary for long-run growth such as health and education suffered. And Sri Lanka needed to borrow more just to repay the loans of the previous regime.
In 2014 interest payments amounted to Rs. 436 billion, 24 per cent of government expenditure.
Sri Lanka’s public debt has continued to escalate placing huge pressure on the Government budget as well, Treasury sources said.
Interest payments on public debt had consumed a large part of Government revenue representing a large portion of Government expenditure.
Therefore the Treasury had to finance budget deficits through more borrowings, thereby increasing the amount of public debt, sources revealed.
At this decisive moment it is essential to take prompt action towards improving the revenue base and efficient collection of taxes and implementing expenditure control at Treasury level, the official said.
In addition to in-house Treasury reforms, a policy plan of public sector enterprise reforms for reducing losses, malpractices, mismanagement of resources and waste would be the only way to reduce the prevailing fiscal deficit, he added.