Domestic, foreign debt soar amidst interest payments
Under the setup of economic revival, the government has paid a massive interest payment for both domestic and foreign debt which is equivalent to state revenue during the first four months of this year, Finance Ministry data divulged.
Total government revenue in the first four months of 2023 was Rs. 821.35 billion whereas the total expenditure on interest payments for domestic and foreign debt stood at Rs. 818. 97 billion in the same period. The revenue and interest payments almost equals with slight difference of Rs. 2.38 billion.
In comparison with the year 2022 figures, the total revenue in the first four months then was posted as Rs, 631.13 billion while the payment of interest rate for total debt recorded at Rs.426.79 billion.
Accordingly there was a substantial revenue surplus of Rs.204.34 billion after the payment of debt interest at that time, Ministry data shows.
Interest payments on foreign debt fell by 64.9 per cent to Rs. 29.8 billion in the first four months of 2023, compared to Rs. 84.9 billion in the same period of 2022 whereas interest payment for domestic debt increased by 130.8 per cent to Rs. 789.1 billion in the first four months of 2023 from Rs. 341.9 billion in the same period of 2022.
The government has been pushed into this high interest payment crisis by raising of funds via issuing of international sovereign bands (ISBs) with high interest rates.
The raising of money via ISBs to refinance bilateral project loans followed by previous governments had been making the annual interest repayment bill higher than with bilateral loans, an official said adding that this refinancing strategy has been disastrous for Sri Lanka
He noted that bilateral borrowing is the country’s safest and most reliable method for financing its external commitments in the medium to short term.
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