Lanka needs to exceed foreign borrowing limit for debt servicing
Sri Lanka is seeking US$3.9 billion from foreign borrowings for debt servicing (loan installments and interest) this year, more than double that of $1.82 billion in 2016.
The country has no option other than to borrow externally for Balance of Payment (BoP) and fiscal support as it had been doing in the recent past, a top Finance ministry official told the Business Times.
The Cabinet of Ministers has already given approval to limit the foreign borrowings to $3 billion for the year 2017. But the financial requirement for this year is
$4 billion.
The Ministry has to seek Cabinet approval again to increase the foreign borrowing limit, he said adding that this will be the highest debt repayment to be made by Sri Lanka within a year. Sri Lanka is entangled in a gigantic debt trap owing to loans obtained by the previous regime for infrastructure development which has not brought any returns on its investments, he disclosed.
Further national revenue and export earnings constantly have come down since 2011 up to year 2014, he said. The Government is expected to raise 225 billion rupees ($1.5 billion) during 2017, through development bond issues within the total gross borrowing limit of 1,579 billion rupees approved by Parliament. Sri Lanka will raise up to $1.5 billion from a sovereign bond and another $1 billion from a syndicated loan this year, Central Bank Governor Dr. Indrajit Coomaraswamy revealed recently.
It is also planning a $1.2 billion sale of Japanese Yen-denominated securities also known as ‘Samurai’ bonds, according to Prime Minister Ranil Wickremesinghe. Apart from this, plans are underway to get $3 billion in sovereign bonds as well as ‘Panda bonds’ or Renminbi-denominated bonds this year. The total of over $6.7 billion is earmarked for 2017 from bond sales this year while the borrowing ceiling was $3 billion. Therefore without the Cabinet approval these loans cannot be obtained by the government, official sources said. The country has to be prepared to either retire or roll-over as much as $5 billion worth of sovereign bond obligations that it has to fulfil every year for a period of three years, commencing from 2019.