Jul 23, 2017

Three-fold increase forecast in loan repayments Featured

The country will find it extremely difficult in the coming years to repay the foreign loans and the attached interest, say Finance Ministry sources.

Quoting an internal report on foreign debt since 1980 and projections until 2024, the sources say the repayment amount would increase three-fold between 2019 and 2022.

The repayment of the borrowings made before 2015 will have an immense pressure on foreign reserves – increasing from 17 per cent in 2014 to as much as 37 pc by 2019.

The report also says economic growth declined steeply between 2013 and 2014 from the 2010-2012 level.

It notes the impact on state finances from the situation when the present government took over.

Lowest income in the region

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State revenue was on the decline in comparison to national revenue from 1990 to 2014, from 21 pc in 1990 to 11.4 pc in 2014.

From 2000 to 2014, Sri Lanka has become the lowest income earning country in the region, with expenditure surpassing revenue.

State revenue to repay loans

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The report shows how the almost entire state revenue having to be utilized to repay loans.

In 2005, revenue was Rs. 380 billion and Rs. 345 billion had to be set aside to pay back the loans.

By 2014, that compared with Rs. 1,195 b revenue and Rs. 1,069 b loan repayment.

Decline in exports, increase in recurrent expenditure, capital investment setbacks, increase in state debt, a six-fold increase in pension repayments between 2000 and 2014 and the impact of under-performing capital projects on state finances are detailed in the report.

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