Sri Lanka gears up to face massive debt burden

Sri Lanka is gearing up to face the massive debt burden now at a critical stage as the bunching effect of loans will come into play in 2019.

Sri Lanka’s government revenue as a share of GDP is lower than many peers, while the government debt-to-GDP ratio is much higher, international rating agencies warned.    

Debt-to-GDP ratio in Ethiopia, Uganda and Ghana among other countries is lower than Sri Lanka even though the revenue-to-GDP ratio in these countries higher than Sri Lanka, they claimed.

However, Central Bank Governor Indrajit Coomaraswamy noted that Sri Lank is a middle-income country striving to transition to an upper middle-income country and therefore its debt-to-GDP ratio cannot be compared with countries like Ethiopia, Uganda and Ghana.       

A sum of Rs.2, 057 billion has been allocated for debt servicing in 2019. This is the largest amount of money a government in the history of this country is compelled to bear in repaying its borrowings.

Out of this amount, Rs.1, 271 should be paid locally next year while Rs.786 billion, which is equal to 4,650 million US dollars should be paid to foreign lenders.

Accordingly, the Government expects to borrow Rs.1, 944 billion from local and foreign sources for its debt servicing including the financing of the budget deficit in 2019.