Budget 2012: Dealing with debt

Saturday, 19 November 2011 01:36 - - {{hitsCtrl.values.hits}}

The upcoming Budget’s largest expense is not the Defence Ministry, but loan instalments and interest elements, said UNP Chief Economist and MP Dr. Harsha de Silva.

Addressing a press conference last morning, he questioned the Government’s economic development strategy, stating that it was now speaking of import substitution.

“In the Appropriation Bill, education has been allotted Rs. 30 billion, while the debt repayment allocation is Rs. 314 billion. There are other allocations from the Provincial Council as well for education; this is what has been allocated for the Education Ministry. There are many loss-making enterprises. With the Expropriation Bill, we will have to take more loans to manage these loss-making SOEs,” he said.

Querying as to where Sri Lanka was headed, Dr. de Silva said that the UNP had been labelled economy ‘gathakayo’ (killers).

“Now who is the ‘gathakaya’? It’s not the World Bank or the IMF and so on. It’s China. Now the Government plans to give China Norochcholai and a part of the Hambantota Port. When unable to pay off its loans, the Government writes off a pound of flesh from Sri Lanka. The economy ‘gathakaya’ is not at the gate; it is inside the house. How can the Government not realise this? Is it blind or is this deliberate?”

Commenting on the budget deficit, he said the UNP believes it must be reduced and that if the Government is doing things to reduce it, the UNP applauds that since the debt repayments cannot be sustained.

“Debt repayment is Rs. 914 billion. The interest element is 314 billion. Education expense is only 30 billion. The reason for the ever-expanding debt repayment is a culmination of deficits year-on-year. We see some countries now collapsing under heavy debt burdens. The percentage of commercial debt has increased by 300% since end 2008. It’s not just debt but the type of debt that they are getting into. The repayment period has decreased and the interest rate has risen. We welcome anything that is done to reduce the budget deficit,” he added.