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Sri Lanka's total debt increase by 71% due to Rajapaksa borrowings

Sri Lanka government’s total debt has increased by a staggering by 71 percent since the taking over of administration in 2015 from previous Rajapaksa regime, official statistics showed.

The present administration has to borrow money since 2016 to repay the massive loans taken by the previous regime, sources from the Treasury said.

The most significant borrowing in 2013 was the US $750 million obtained from international markets at the highest ever interest rate of 8.9 percent at a time when the global benchmark rate for that type of loan was  around 1.3 percent.

According to Finance Ministry data, public debt has increased to over Rs. 8000 billion in 2015 from Rs. 4000 billion in 2009.

While the government went on a borrowing spree on international capital markets, government revenue nose-dived.

In 2005, Sri Lanka's tax-to-GDP ratio was 13.7 percent. By 2014, it was 10.1 percent, one of the lowest in the world.

As a result, expenditure necessary for long-term growth in sectors such as health and education suffered. As a result, Sri Lanka needed to borrow more just to repay the loans of previous regime.

In 2014, interest payments amounted to Rs. 436 billion, approximately 24 percent of government expenditure.

Sri Lanka’s public debt has continued to escalate putting huge pressure on the Government budget as well, official sources said.

External debt in Sri Lanka averaged USD 45.88 billion from 2012 until 2019, reaching an all time high of USD 55.47 billion in the second quarter of 2019 and a record low of USD 37 billion in the fourth quarter of 2012.

To pay interest and principal obligations of the existing stock of foreign debt, Sri Lanka will need $ 5-6 billion in each of the next five years.

Loan repayments between 2019 and 2022 would be around USD 21 billion. The country’s foreign debt is estimated at USD 55 billion.

Sri Lanka’s public debt amounted to Rs. 12 trillion at the end of 2018 .The total debt was Rs. 12.6 trillion as of June 2019. Public debt is 83 percent of the economy (83% GDP)

As of the end of 2018, Rs. 6 trillion of Rs. 12 trillion or 50% of total debt was foreign debt. As of June 2019, Rs. 6.3 trillion of Rs. 12.6 trillion debt is foreign debt. As a result, foreign vs domestic debt is now 50/50.

Foreign debt declined from 37% of the GDP in 2009 to 30% in 2014. Since then, foreign debt-to-GDP ratio has increased by 11% percentage points to 41% as of the end of 2018.

The domestic debt-to-GDP ratio has declined from 50% of the GDP in 2009 to 42% in 2018.

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