Sri Lanka struggles with debt trap

Sri Lanka appears to be entangled in a skyrocketing debt issue as the country’s revenue has become inadequate to bridge the state expenditure during the first quarter this year, Finance Ministry data showed.

The government has resorted to heavy borrowings more than its revenue during the first four months this year risking its external debt profile, economic experts said.

Therefore Sri Lanka has no alternative other than tapping international capital markets once again to raise urgently needed funds through

syndicated loans, they added.

“Sri Lanka’s high debt burden and gross financing needs require further revenue- based consolidation. Timely progress in structural reforms, including tax administration and energy pricing, will strengthen the platform for durable consolidation,” Mitsuhiro Furusawa, Deputy Managing Director of IMF said in a statement on the country’s economic performance.

According to the Finance Ministry’s Mid-Year Fiscal Position Report 2017, the government’s total revenue increased significantly by 24.6 per cent to Rs. 589.7 billion in the review period of 2017 compared to Rs. 472.7 billion in the same period of 2016.

But the total expenditure increased by 16.5 per cent to Rs. 822.8 billion and the deficit was Rs. 233.1 billon during the first quarter.

The total debt has sky rocketed to Rs 618.3 billion while the government’s loan installment payable has increased to Rs.455.28 billion during the first quarter this year from Rs.219 billion in the same 2016 period.

Interest payment during the same period has gone up to Rs. 243.49 billion from Rs. 196.67 billion last year. Accordingly, the gover nment has to pay Rs. 698.78 billion as interest and installments for the first quarter this year. The revenue is not sufficient to pay this massive amount of debt.