Raising borrowing limit imperative for fighting COVID-19: Mangala

Wednesday, 8 April 2020 03:13 - - {{hitsCtrl.values.hits}}

Former Minister of Finance Mangala Samaraweera yesterday called for raising of the borrowing limit to fight COVID-19 whilst pointing out that due to legal complications, there may also be delays in drawing down the $ 128 million (Rs. 24.4 billion) soft-loan granted by the World Bank Group for fighting COVID-19

In a statement Samarweera said for the period of 1 January 2020 to 2 April 2020, the Government has borrowed Rs. 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, the 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 1 January 2020 to 30 April 2020 is Rs. 721 billion. Last year, the Treasury issued 194 billion in bills and bonds between 3 April 2019 and 30 April 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 $ 128 million (Rs. 24.4 billion) soft-loan granted by the World Bank for fighting COVID-19. Therefore, in 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 which responsibly increases the borrowing limit.