Foreign debt suspension leads to $8.6 bn outstanding in 24 months
The Government’s temporary suspension of foreign debt payments leads to US $8.6 billion outstanding over 24 months, the Finance Ministry’s latest fiscal position report revealed.
According to this report, unpaid debt from April 12, 2022, to April 30, 2024, is $6,020 million. The unpaid interest during this period amounts to $2,586 million.
Secretary to the Ministry of Finance, K. M. Mahinda Siriwardena, stated that the mid-year fiscal performance report was submitted to Parliament under Article 10 of the Fiscal Management (Responsibility) Act No. 3 of 2003.
According to the government’s fiscal policy, one objective of presenting such a report is to provide updated information on the government’s fiscal activities, the Secretary of Finance mentioned.
The total gross borrowing limit approved by Parliament for the year 2024 amounted to Rs. 7,350 billion, including provisions made for the execution of external debt restructuring and financing of bank recapitalisation during the year.
The utilisation of Government borrowings for the period from January 1 to April 30, 2024 was recorded as Rs. 796.5 billion.
Total borrowing utilisation comprising domestic and foreign project/programme borrowings amounted to Rs. 734.2 billion and Rs 62.3 billion, respectively to finance debt service payments and development projects during the period.
From the total borrowings, approximately 92.2 per cent consisted of domestic borrowings in the first four months of 2024.
Accordingly, around 98.5 per cent of the total domestic borrowings were raised by way of Treasury Bonds, which were recorded at the value of borrowing made during the year while 1.5 per cent represents Treasury Bills in the first four months of 2024.
The government recently announced debt restructuring agreements with commercial creditors holding its International Sovereign Bonds (ISBs), following deals with key bilateral lenders.
By the end of 2023, ISBs constituted $12.5 billion of Sri Lanka’s $37 billion external debt. As part of the restructuring, investors agreed to a 28 per cent nominal reduction on the bonds’ principal, incorporating Macro-Linked Bonds tied to economic growth and a possible governance-linked bond.
The agreement results from ongoing discussions with the Ad-Hoc Group (AHG), which controls 50 per cent of ISBs held by foreign entities.
Sri Lanka is among the first to use the IMF’s new Debt Sustainability Analysis (DSA) framework, aiming to reduce the Public Debt to GDP ratio from 128 per cent in 2022 to below 95 per cent by 2032, and foreign currency debt service from 9.2 per cent of GDP in 2022 to under 4.5 per cent during 2027-2032.
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