Government continues borrowing spree with controversial T-bond issue hanging like Damocles’ sword

With the recent controversial Treasury bond issue hanging like the ‘sword of Damocles’, the government continues its local borrowing spree to provide provisional advances to the state expenditure authorised under the consolidated fund.

The Central Bank (CB) has issued Treasury bonds amounting to Rs. 26 billion once again recently to safeguard ministry funds without resorting to the previous regime’s practice of transferring money from one state institution to another to meet a crisis, official sources said.

The government’s borrowing limit is Rs. 850 billion for the current financial year and it can raise another Rs.35-50 billion by issuing Treasury bills, a senior government official said adding that the country is on the verge of exceeding the limit.

In February and March the government has resorted to borrow more from bond sales which helped reduce the negative impact on the balance of payments, but this practice should be curtailed in the coming months, he emphasised.

Finance Minister Ravi Karunanayake told the Business Times that there is no issue in local borrowings at present but they have to consider cheaper borrowing from the international markets in the event of exceeding the local borrowing limit.

The Treasury is borrowing within the limits stipulated in the budget using different tools like low interest, etc, he disclosed.

“We are managing the economy in a pragmatic manner but a huge outstanding amount in payments running into billions of rupees needs to be paid for infrastructure development projects given to contractors through unsolicited bids during the previous regime,” he said.

“The government had sought parliamentary approval to raise the borrowing limit to Rs. 1,250 billion, because we need to safeguard the ministry funds without spending for ongoing projects. But the relevant bill was not passed in parliament,” he pointed out.