Failed large-scale projects has sunk the nation into further debt

Failed large-scale projects has sunk the nation into further debt

By Tharushan Fernando

Jul 30, 2016 | 11:39 pm

The total Sri Lankan debt in 2005 was 2222.3 Billion or 2.2223 Trillion rupees. This figure reached up to 4590.2 Billion rupees or 4.5902 Trillion rupees. What is astounding is that this figure doubled in 2015.

In 2015, the total government debt was 8503.2 Billion rupees or 8.5032 Trillion rupees.

       Year                Rupees ( Million )

2005               2,222,343.00
2006               2,582,648.00
2007                3,041,685.00
2008              3,588,962.00
2009                 4,161,423.00
2010               4,590,245.00
2011                5,133,365.00
2012               6,000,113.00
2013               6,793,250.00
2014              7,390,899.00
2015              8,503,227.00

In the recent past it was speculated that the total government debt was not accurate. Nonetheless, with the increase of debt a major portion of the government’s revenue has to be spent on repaying the loan installments and interests.

In 2012, this figure was at 96.8 % and increased to 102.2 % in 2013.The figures dropped to 90 % in 2014 and in 2015 it rose to just over 95 %.

           YEAR                PERCENTAGE(%)
2012                            96.80
2013                          102.20
2014                            90.00
2015                            95.40

Senior Lecturer of Wayamba University of Sri Lanka, Dr. Aminda Methsila Perera pointed out that when Rs 100 is earned, 95 rupees and 40 cents is spent on repaying the loan and the interest, thereby, leaving only a mere 4 rupees and 60 cents to spend on education , infrastructure development and even to continue with public services.

“It clearly shows that we have been placed in a position where we cannot cover the normal expenses of the country “, he said

In a backdrop where the country’s revenue is used to repay the loan installment and interests and when the remainder is not sufficient to cover the other expenses, what happens is that more loans are obtained.

Dr. Aminda Methsila Perera explained that with the rise in the dollar rates, an increase of 258 billion rupees in debt can be seen.

He added that when taking a look at the sources that were used to obtain the loans. In 2004, 99 percent of the loans were obtained on concessionary conditions. However, due to certain bad decisions made, only 48 percent of the loans obtained in the recent past were obtained under concessionary conditions while 52 percent of the loans were commercial loans with no concessionary conditions. As interest rates of commercial loans are very high there is a higher debt burden.

Economists say that one of the main reasons for the country to be debt-ridden is the failure of many large scale projects that were launched with the aim of increasing the revenue of the government.

The Mattala Rajapaksa International Airport funded 100 % by International loans suffered a loss of 2881 Million rupees or 2.881 Billion rupees in 2014 and the debt recorded in 2015 was 2875 Million rupees or 2.875 billion rupees.

Numbers show that the Hambantota Port has also suffered continuous losses.

In 2014, the loss suffered was 3819 Million rupees or 3.819 Billion rupees and in 2015 that figue topped to 4949 Million Rupees or 4.949 Billion Rupees.

Senior Lecturer of the Wayamba University of Sri Lanka, Dr. Aminda Methsila Perera pointed out that there are no issues in obtaining loans but it generates revenue to repay the loans,however, most of the loans obtained in the recent past were utilized on failed projects and these failed projects continue to incur losses and in addition to the debt burden , the government is compelled to obtain more loans to cover the losses.

“Therefore we are are stuck in a serious debt trap”,  he said

Minister of Finance, Ravi Karunanayake pointed out that the previous government did not obtain loans from Japan or the World Bank or the IMF because they obtained loans from Commercial Banks and the loans were obtained on a 4 year bullet payment where the first installment needs to be paid in 4 or 5 years and in 2015 what took place was the addition of these loans and it remains in 2016 as well.

He further charged that the previous government took loans for everything, not only for the war. And when taking over the country from Mahinda Rajapaksa, the loans obtained since independence to January 2005 was 1784 billion rupees.

The Finance Minister pointed out that from January 2005 to the 08th of January  8, 2015 the total loans exceeded 9900 billion rupees and the loans have quadrupled because of these reasons.

He charged that 286 billion rupees has been paid for the Hambantota Port but the revenue is only 300 million rupees. And out of the 300 million rupees the profit is only 20 percent.

“The same goes to the Mattala Airport. Cost is 26 billion. Has a single aero-plane landed there? ” he asked.