Debt Payback To Reach Rs 2T Between 2019-22

• To Peak Touching US$ 3,913M In 2025

by Amila Ekanayake

Sri Lanka’s debt repayment is to peak to a staggering US$ 13,795 million or passing the two trillion Rupee mark to reach approximately Rs  2,069,250 million within the four year  window between 2019- 2022.

According to FinMin statistics foreign debt servicing schedule shows clustering during 2019-22 mainly due to maturing sovereign bonds, of which the majority or US$ 4.5 billion being issued during the Rajapaksa regime spanning from 2010-14.

As at end September 2016, the total debt servicing for 2016 was US$ 1,608 million which is estimated to reach US$ 2,237 million in 2017 and US$ 2,381 in 2018. But in 2019 this would spike to US$ 3,752 million whilst debt repayments for 2020, 21, and 22 would be US$ 3,225, 3,219 and 3,599 million respectively. Then it would decelerate but reverse to reach all-time high of US$ 3,913 million in 2025.

Thereafter debt servicing would take a downward trend reaching  US$ 981 million in 2031 US$ 815 million in 2033, US$ 481 million in 2036 and finally touching a 30-year low of US$ 353 million in 2038.

The total debt stock of Sri Lanka has gone up by 233% to Rs. 7, 391 billion during the period from 2005 to 2014. The total debt burden of Sri Lanka in 2005 was Rs. 2,222 billion and, within 5 years, it increased up to Rs. 4,590 billion in 2010. In addition there is another Rs 2,000 billion debt obtained by the Public owned Enterprises directly off the balance sheet.

According to Finance Minister Ravi Karunanayake, Sri Lanka is embroiled in a gigantic debt trap. The main reason is that the loans obtained by the previous regime for infrastructure development has not brought any returns on its investments. Further the national revenue and the export earnings constantly came down since 2011 up to year 2014 (See http://www.thesundayleader.lk/2017/01/29/debt-trap/).

Developed countries use their own resources to build mega size infrastructure facilities such as ports and airports. Developing countries tent invite foreign investors  to build such huge projects instead as their economies cannot afford  the high cost of large scale projects. Alternatively,  foreign investors are invited to construct such infrastructure under Build, Operate and Transfer  basis or Build, Own and  Operate  called BOO/BOT basis as  in such an instance the  developing countries need not bear the burden of  debt repayment.

Sri Lanka also in the past developed telecommunication system in the island on BOO/BOT basis. While it enables investors to regain dividends for the investment during a given time and, simultaneously, it does not make developing countries to pass the burden of investment on its poor citizens.

This debt repayment covers only the project loans and the International sovereign bond. The liability on the loan obtained from the IMF and the investment by foreigners on the treasury bills and treasury bonds is to be paid separately. Its unfortunate that the previous government did not have any strategy to turn such giant loss making entities  in to profit making ventures.

Therefore, the current government has made arrangements to convert these credits in to equity  under the Public Private Partnership concept thereby relieving the people from the debt burden. While the government is taking untiring efforts to convert these white elephants into profit making institutions, and generate income and employment for the youth in the country, an opposition group is engaged in sabotaging such efforts charging that the government is attempting to sell off national resources to foreigners. It is high time people thought rationally in response to such misleading remarks made by these rival groups.

At the same time, people should ask the opposition who make an abortive attempt to jeopardize the well being of the people to show some avenues to generate income for the country to repay the massive loans accumulated by 2019 which were obtained by the previous government.

Finance Minister Ravi Karunanayake delivering his 2017 Budget Speech pledged that his government will not leave the debt trap and the  economic war to the future generations.

“No finance minister wants to impose taxes and burden the people. Every finance minister wants to give concessions to the people improving their lives. However, our government inherited the worst economic legacy that anyone could inherit. We are forced to fight a constant battle to relive ourselves from this debt trap we are embroiled in. The guidance I receive from the President and the Prime Minister in this regard is immeasurable. I am reminded of a quote from Field Marshall Sarath Fonseka who said, “I will not leave this War to the next Army Commander” we also wish to assure this  House and our fellow citizens, that our government will not leave this economic war to the future generations.”