‘Government. must immediately find another $5 billion for day-to-day expenses” – The Island
By Hiran H. Senewiratne
The government must find/borrow an additional five billion dollars immediately for current expenditures, in order to provide essential services to citizens this year, even with full debt restructuring by other countries. This amount is to be generated through lines of credit, currency swaps, some investments in the country and the sale of assets, which also provide temporary relief to the country, Professor Sirimal Abeyratne said.
“We are now in the early stages of bankruptcy and I am not surprised at the position we find ourselves in today due to our overspending. This has led to a balance of payments problem for the country, explained Professor Abeyratne, a senior economist attached to the University of Colombo and former chairman of the Central Bank of Sri Lanka’s Monetary Policy Advisory Committee.
Abeyratne made the observations while addressing the Rotary Club of Colombo South on the topic “Sri Lanka’s current debt crisis and beyond,” last week at the Dutch Burgher Union Hall in Colombo.
Abeyratne added: “In 2007, Sri Lanka raised US$500 million through international sovereign bond issues. During the period 2009 to 2019, Sri Lanka issued US$17 billion worth of sovereign bonds with 5 to 10 year maturities. Therefore, we have to pay 6 billion US dollars every year for these bonds, but unfortunately the country does not have a financial buffer to stop the situation.
“Due to the Covid-19 pandemic situation, income from the tourism sector and remittances from workers entering the country from the Middle East have dropped significantly.
“This crisis was predicted two years ago, but the competent authorities never heeded the warning. When we had budget deficits, we were spending beyond our capacity and in the internal financial area, the significant tax cuts shortly after the presidential election, which cost more than 500 billion rupees a year from government coffers, left us with insufficient finances to pay our debts.
“In the midst of these developments, educated young professionals who could contribute to the economy will leave the country and ultimately we will be left with a group of poor people. This happened in Venezuela, where more than five million educated young professionals left for other countries. This set of people could play an important role in economic development.
“Since our country’s foreign exchange reserves have been depleted and due to the large tax breaks given, we are facing a severe shortage of rupees in the country and are unable to pay the salaries of civil servants and day-to-day operations.
“Right now, we need to build trust in the eyes of the international community to attract foreign direct investment to the country. Foreign investors do not trust our politicians. If we could build trust, we could attract foreign direct investment. Sri Lanka should take all possible measures to boost exports, which is the most important task at this stage.