Business Times

Sri Lanka’s debt to GDP ratio at manageable levels

By Bandula Sirimanna

Despite the challenging economic environment, Sri Lanka has been able to maintain a debt to GDP ratio at a manageable level due to a significant increase in the official foreign reserves. The country has never been in default and has maintained a good track record in managing debt, Central Bank sources said this week.

Most Debt Burden Indicators (DBI) has shown that Sri Lanka is not a very high debt burden country in the recent past due to its ability in repaying its outstanding external debt obligations from its earnings.
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 Gross National Product (GNP) and exports of goods and non factor services including worker remittances and compensation of employees.

A senior official of the Central Bank said that with the end of the war against terrorism in May 2009, the adverse conditions affecting the economy began to fade away. Sri Lanka Development Bonds in foreign currency were issued three times during the second half of 2009 with longer maturity periods. The second sovereign bond of US$ 500 million in October 2009 was oversubscribed by over 13 times, he said.

Interest rates on government securities declined significantly and a 10 year Treasury bond was issued during the second half of the same year. These developments eased the heavy burden on effective debt management that existed during the first of the year, he added.

According to Finance Ministry sources, Sri Lanka in 2009 spent a record $1,043.2 billion in foreign debt service made up of $815.3 million in principal and $227.9 million in interest. The ministry also forecast that this will rise to $1,539.40 million made up of $1,224.10 million in principal and $315.3 million in 2012.

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