Sri Lanka’s total debt balance and overall debt composition at a particular period cannot be calculated precisely in the absence of clear-cut written laws that would define the scope and responsibilities of the Central Bank of Sri Lanka (CBSL) and the General Treasury, a special audit report has revealed. “The responsibility of the scope assigned [...]

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No clear laws to assess national debt: Auditor General

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Sri Lanka’s total debt balance and overall debt composition at a particular period cannot be calculated precisely in the absence of clear-cut written laws that would define the scope and responsibilities of the Central Bank of Sri Lanka (CBSL) and the General Treasury, a special audit report has revealed.

“The responsibility of the scope assigned to the Central Bank of Sri Lanka and the General Treasury in regard to Debt Management of Sri Lanka, had not been clearly identified by a written law and a formal methodology to identify the accurate total debt balance in the country at a certain instance and its composition could not be recognised as well,” the report revealed.

The report titled “Special Audit report on Financial Management and Public Debt Control in Sri Lanka 2018-2022” by the National Audit Office looked into domestic and foreign borrowings made by the Government, sources of borrowing, debt reporting, debt servicing, achievements considered important for public debt management among objectives cited in the Fiscal Management (Responsibility) Act and internal control of public debt and related matters.

The report also noted the failure of the Government to achieve considerable amount  of its priorities on public finance mentioned in statements  relating to fiscal strategies presented in Parliament through the second reading of the Appropriation Bill from 2017 to 2021.

The report raised concerns where debt balances realised during the year had not been correctly accounted for as debt, especially, the loan taken by the government to construct the Hambanthota Port. This loan is not appearing in the financial statements of the government or the Sri Lanka Port Authority. The Auditor General has stressed the need to introduce a methodology to accurately record the total debt balance.

As one of the key recommendations in the report, Auditor General W.P.C. Wickramaratne called on Parliament to prescribe by law the types of loans that should be more accurately included in the category of public debt, considering the internationally accepted definitions of public debt and the borrowings should be  made within the borrowing limits set under the Appropriation Act and the Active Liability Act.

“A Projection Plan for repayment of project loans included in foreign borrowings was available with the External Resource Department. However, according to that Plan, earning or managing foreign currency had failed. As such, Sri Lanka had to suspend the affected debt servicing until Sri Lanka restructures its debts,” the report added.

According to annual reports of both the General Treasury and CBSL, the government debt which was Rs. 12,030.5 billion as of December 31, 2018, had gradually increased up to Rs. 17,589.3 billion as of December 31, 2021 while the percentage of government debt which had represented 84.2 percent of the Gross Domestic Product (GDP) as of December 31, 2018, had increased up to 104.6 percent as of December 31 2021.

The total value of foreign currency denominated debt as of the end of 2019, 2020 and 2021 are USD 38,687.14 million, USD 38,492.4million and USD 37,204.8 million respectively.

The amount of government debt and the per capita debt according to mid-year population, has continuously increased and it had increased up to Rs. 793,888 representing an increase of 257 percent by the end of 2021 as compared with 2010.

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