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Govt.’s unpaid bills mounting, Fin. Min. annual report reveals
The Government’s unpaid bills now amount to 2.2 percent of Sri Lanka’s Gross Domestic Product (GDP), and include claims worth Rs 1.8bn incurred in the conduct of last year’s Presidential election, the Finance Ministry’s 2019 Annual Report released a few days ago reveals.
The Treasury also owed commercial banks Rs 45.8bn in reimbursement for higher interest rates paid on senior citizens’ fixed deposits on Government instructions.
Through its 2015 budget, it mandated commercial banks to grant a special interest rate of 15 percent for senior citizens’ fixed deposits up to Rs 1mn. In 2017, the Finance Ministry increased the upper limit of the fixed deposit to Rs 1.5mn but the interest rate remained at 15 percent.
The Treasury was to pay the difference between the special interest rate and the market standard interest rate offered by commercial banks. However, arrears have now run up.
The Treasury is also faced with a bill of Rs 23.9bn for fertiliser and Rs 25.7bn for pharmaceutical drugs. It owed road construction contractors Rs 18.4bn, and Rs 7.1bn is owed for Gamperaliya rural work, the report says. Urban development has run up bills of Rs 6.9bn, and 2.8bn must be paid for school development projects.
Parliament did not approve an Appropriation Act for 2020. Instead, there was a Vote on Account for four months from January to April. The provisions allowed for were not sufficient to realise unclaimed bills and this “has been a challenge for the continuation of essential cost items such as fertilizer and pharmaceutical products, in particular the labour-intensive construction sector was badly affected [SIC]”.
The amount of foreign funds disbursed, but not accounted for, in 2019 (owing to no budgetary provisions in the approved Appropriation Act) is Rs 212bn. The envisaged budget deficit of 4.4 percent of GDP has expanded to 6.8 percent of GDP, excluding the unpaid claims. The actual deficit for 2019 would be 9.0 percent of GDP with the inclusion of all unpaid claims, the report says.
COVID-19 has increased additional financing needs by about 2.0 percent of GDP. Foreign currency exposure to the total debt is almost 50 percent. Total debt service payments including interest payments between June and December this year is US$ 3.8bn (Rs 704bn).