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Govt. proposes to borrow more to repair pandemic-hit economy
View(s):The Government is seeking Parliamentary approval to borrow more funds to repair the pandemic-hit economy by amending the ceiling rate of government guarantee to fifteen percent from current ten, according to a bill submitted to the House this week.
The bill submitted on Wednesday by Prime Minister Mahinda Rajapaksa in his capacity as Minister of Finance to amend the Fiscal Management (Responsibility) Act also proposed that at the end of the financial year beginning January 1, 2030, the total liabilities of the government including external debt do not exceed sixty per centum of the estimated gross domestic products.
The move to increase the Government debt came after the Central Bank of Sri Lanka (CBSL) declared in its annual report released last week that the Sri Lankan economy contracted by 3.6 percent in real terms in 2020, “recording the deepest recession since independence” due to the global pandemic.
The pandemic also caused a decline in the overall size of the country’s economy to US dollars 80.7 billion in 2020 from US dollars 84.0 billion in 2019.
According to the recent annual report of the CBSL, the total outstanding central government debt rose to 101.0 percent of GDP at end 2020, from 86.8 percent of GDP at end 2019.
“Nevertheless, the relative share of outstanding foreign debt to total central government debt declined notably to 40.0 percent at the end of 2020, from 47.6 percent at the end of 2019. Amidst adverse speculation, the Government continued to maintain its impeccable debt service record,” the CBSL noted.