Sri Lanka’s debt – there is an escape

By K. Godage

It appears that we are sunk in debt; the official estimate of what Sri Lanka currently owes its financiers is $64.9 billion — $8 billion of which is owned by China. The country’s debt-to-GDP currently stands around 75% and 95.4% of all Government revenue is currently going towards debt repayment.

This debt situation is clearly not sustainable, but there’s more:

In addition to racking up large amounts of Government debt via the usual channels, it’s now becoming evident that the previous Government also utilised State-Owned Enterprises to take out additional loans on its behalf. While the full extent of this extracurricular lending seems unknown, current estimates peg it at a minimum of $9.5 billion — which is all off the books of the Finance Ministry.

“We still don’t know the exact total debt number,” Sri Lanka’s Prime Minister admitted to Parliament earlier this month. The Finance Minister is intending to present his second Budget soon; do hope it will not suffer the same fate as his first budget.

The Finance Minister had at a preparatory meeting this week accepted some proposals from trade unions and civil society. As reported, among the proposals presented to the Minister were to provide a systematic training for the new recruits to the public service, revise the retirement age limit, how to impose taxes on those who earn huge incomes but stay away from paying taxes as they are excluded in the tax system. Each proposal was said to have been analysed in detail during this meeting. The factors that could affect the implementation such proposals had also been discussed at the meeting.

These are of course important but not our principal concern, it is the huge debt our country faces: my thoughts go back to the ’90s when CBK was our President, she instructed Foreign Minister Kadirgamar to find out what we owed the Chinese Government for the Government to Government assistance (not monies owed to the Parastatels) they had given us (I was then Additional Foreign Secretary and accompanied the Minister on this visit to China); we had an official meeting with the Prime Minister (that was a special courtesy extended to our country by China) and Minister LK stated that our President wished to know as to what we owed China for the Government to Government  assistance tendered over the years and the Prime Minister consulted his staff, who were seated behind him and said, “Please inform Madam President that we have not asked!!” Such was the value China had placed on our friendship.

Now that this Government has also adopted a refreshingly new, and correct policy, towards China, which was one of only two countries that helped us during our self-inflicted conflict/war, we should ask China to waive off the $ 8 billion we owe China; that would be small change for China but an enormous gesture that would far exceed in value to the monies owed to them; then our relationship would be concretised forever. 

If China obliges, as she has done before, then we should ask the US to use its enormous influence over the World Bank, the IMF and the ADB to reschedule their portfolios and give us a break. This would take a huge load off our debt burden and would be a meaningful contribution to the development process our country has embarked upon.

 (The writer can be reached via [email protected].)