Sri Lanka’s central government and state enterprises were up to 1,368 billion US dollars in arrears in foreign and domestic debt and suppliers credits, up to June 2022, an official statement has shown.
Sri Lanka defaulted on April 2022 despite ending a 30-year civil war, after running up foreign debt rapidly through several years of monetary instability, while operating a highly discretionary ‘flexible inflation targeting’ regime as the country lost the ability to make foreign payments freely.
By end June 2022, Sri Lanka had 40.6 billion dollars of foreign borrowings made up of 35.5 billion US dollars in central government debt, 1.9 billion in state enterprise guaranteed debt and 3.1 billion US dollars, while the central bank had borrowed another 3.1 billion US dollars.
Of that 1.4 billion in swap from China was unused. Sri Lanka also owed another 1.9 billion US dollars to the Asian Clearing Union. However there are also inflows from the ACU to Sri Lanka.
The central government was in arrears up to 1,068 million dollars to foreign borrowers up to June 2022.
Sri Lanka had arrears of 211.8 million US dollars in interest to international sovereign bond holders, who were the largest creditor with 12.55 billion US dollars of debt. In July Sri Lanka defaulted on the principle of a bond.
China Development Bank which had lent 2.652 was owed 102.5 million US dollars in arrears by June.
Japan which had lent 2.57 million dollars was owed 1.4.6 billion in arrears.
Separately domestic Sri Lanka Development Bonds were in arrears up to 242 million US dollars.
Ceylon Petroleum Corporation was listed as owing 577.6 million dollars in payables.
The petroleum utility borrows heavily and runs up supplier’s credit whenever forex shortages emerge from liquidity injections made to suppress interest rates under flexible inflation targeting.
Ceylon Petroleum Corporation separately had loans of 1.577 billion US dollars from Bank of Ceylon and 1,089.7 billion dollars in monetary instability loans from People’s Bank in addition the 577 million US dollars in payables.
From around September 2014 to 2023 Sri Lanka only had monetary stability in the year 2017 and a part of the year 2019 allowing the country to make external payments freely, leading to a steep run up in sovereign bonds, bailout borrowings from China and CPC supplier credits.