Sri Lanka debt management:

Public debt declines

Maintains good track-record:

The country’s total outstanding debt stock as a percentage of Gross Domestic Product (GDP), declined to 81.1 percent in 2008 from 85 percent in 2007. This was revealed at the launch of the publication on Public Debt Management in Sri Lanka -2008 which was held yesterday at the Central Bank.

Superintendent of Public Debt, Central Bank of Sri Lanka C.J.P Siriwardene said most Debt Burden Indicators (DBI) have shown that Sri Lanka is a low debt burden country.

DBI measures the level of the burden of external debt to the economy. For this purpose two aggregate ratios are used comparing total outstanding external debt (DOD) with GNP and XGS.

DOD/GNP has declined to 33.6 percent in 2008 compared to 37.5 percent in 2007 reflecting an improvement in external debt sustainability of the country. However, DOD/XGS has increased marginally to 102.4 percent compared to 100.6 percent in 2007 comparing this ratio with its critical values shows that Sri Lanka as a less indebted country in 2008.

The actual gross borrowings of Rs. 689 billion in 2008 were within the Parliament approved annual borrowing limit of Rs. 708 billion. The total borrowing from domestic and external sources amounted to Rs. 559 billion and Rs. 130 billion respectively last year. The total outstanding debt stock increased by Rs. 536 billion and stood at Rs. 3,578 billion as at end 2008, he said. The total interest cost on public debt last year was Rs. 212 billion. The interest cost of domestic and foreign debt amounted to Rs. 182 billion and Rs. 30 billion respectively in 2008.

In terms of GDP, the interest cost of the government budget declined to 4.8 percent in 2008, from 5.1 percent in 2007.

Depreciation of the Sri Lankan Rupee against major loan currencies resulted in an increase of the debt stock last year by Rs. 131 billion or 4.3 percent of the total debt stock he said.According to the Budget 2009, the total gross borrowing limit of the government for 2009, in terms of book value, amounts to Rs. 840 billion.

Out of this Rs. 840 billion Rs. 25 billion been allocated to unforeseen contingent expenses during the year. Out of the balance Rs. 815 billion, Rs. 241 billion is expected to be raised from foreign sources and the remaining Rs. 574 billion is through domestic sources, he said.

Central Bank Governor Ajith Nivard Cabraal said Sri Lanka has never been in default and the country has maintained a good track record in managing debt. Despite the challenging economic environment, the country was able to maintain 81 percent debt to GDP ratio.