Due to legal complications, there may also be delays in drawing down the USD 128 million (LKR 24.4 billion) soft-loan granted by the World Bank Group for fighting COVID-19, Former Sri Lankan Finance Minister Mangala Samaraweera warned on Wednesday.
He pointed out in a press statement that for the period of January 01, 2020 to April 02, 2020, the Government has borrowed LKR 650.15 billion through Sri Lanka Development Bonds, a dollar-loan from the China Development Bank and primary auctions of Treasury bills and Treasury bonds.
Furthermore, Central Bank holdings of Government securities and other data on Central Bank open-market-operations suggest significant direct monetary financing of the deficit. This will add to the sum of government borrowings.
The borrowing limit, approved by a resolution of Parliament on 23 October 2019 for the period January 1 2020 to April 30, 2020, is LKR 721 billion. Last year, the Treasury issued LKR 194 billion in bills and bonds between April 3, 2019 and April 30, 2019. Therefore, it is almost certain that a breach of the borrowing limit is imminent.
Once the borrowing limit is reached, there will be no legal authority under which public debt can be issued. As a result, the government may face insurmountable challenges in raising the funds necessary for managing this crisis.
Due to these legal complications, there may also be delays in drawing down the USD 128 million (LKR. 24.4 billion) soft-loan granted by the World Bank for fighting COVID-19.
“Therefore, in the light of these urgent and unforeseen requirements arising from the pandemic, I urge the government to immediately move a resolution in Parliament to raise the borrowing limit. I am certain the entire Parliament will support such a resolution that responsibly increases the borrowing limit,” Samaraweera said.