The Government’s total outstanding debt increased by Rs 776.6 billion (8.3 per cent) to Rs 10,163.9 billion, as at the end of June 2017 from Rs 9,387.3 billion, as at the end of 2016, the Central Bank of Sri Lanka (CBSL) said.
This comprised a total domestic debt stock of Rs 5,666.5 billion, a Rs 325 billion (6.1 per cent) increase, and foreign debt, a sharper Rs 451.6 billion (11.2 per cent) to Rs 4,497.4 billion increase.
In respect of Sri Lanka’s foreign debt and foreign debt servicing commitments, US based credit rating agency – ‘Moody’, in a statement, said that Sri Lanka’s debt repayment bill is slated to rise steeply, almost doubling from the current US$ 2.2 billion (Rs 337.9 billion)* to $4.2 billion (Rs 645.1 billion)* in 2019.
Therefore, sustained fiscal consolidation and a more flexible exchange rate (ER) will combine to reduce external borrowing requirements and preserve foreign exchange reserve levels, both positive for external resilience, Moody’s said.
A weak ER will make imports more costly while giving a boost to exports, thereby narrowing the trade deficit. And, with external (foreign) demand slack as a result, that will also in turn reduce overall expenditure, leading also to the narrowing of the budget deficit and the preservation of foreign reserves.
Nonetheless, the Central Bank said that total expenditure and net lending during the first half of 2017 increased to 9.3 per cent of the estimated GDP (Rs 1,210.2 billion) from 8.7 per cent (Rs 1,070.6 billion) recorded in the corresponding period of 2016, an increase of Rs 140.1 billion (13.1 per cent).
Accordingly, recurrent expenditure also increased to 7.1 per cent of GDP (Rs 918.2 billion) during the 1H of 2017 from 6.8 per cent (Rs 835.5 billion) in the corresponding period of 2016, an increase of Rs 82.7 billion (9.9 per cent), while capital expenditure and net lending increased to 2.2 per cent of GDP (Rs 292 billion) from 1.9 per cent (Rs 235 billion) in 2016.
The overall budget deficit as a per cent of GDP declined marginally to 2.6 per cent during the first half of 2017 from 2.7 per cent in the corresponding period of 2016. The primary balance (i.e., revenue minus expenditure net of debt servicing costs) as a per cent of GDP improved to 0.1 per cent during the 1H of 2017 from a deficit of 0.3 per cent in the corresponding period of 2016, CBSL said.
*Conversions are based on the middle rate of the ‘spot’ as at 17 October, 2017 which was Rs 153.60 to the US dollar.
By Paneetha Ameresekere (Ceylon Today)