Sri Lanka has never defaulted on loans and it will never happen under this government which has taken steps to honour all its debt obligations, said State Minister of Finance and Mass Media Eran Wickramaratne, elaborating on the country’s external debt position at the 60th Annual General Meeting of the National Chamber of Commerce of Sr Lanka (NCCSL) in Colombo last week.
He said the government has a major debt component to be met this year and added that all repayments will made on time. “We will change the direction of all major indicators of the economy which is not an easy task.”
Sri Lanka has to meet external debt of US$ 2.6 billion in the first quarter and US$ 5.9 billion by the end of the year.
Presenting a snapshot of Sri Lanka’s macroeconomic position, the Minister said government revenue which stood at 27 percent of the GDP in 1978 had plunged to 11.5 percent by 2014.
“Any country having government revenue below 15 percent is in serious trouble as it will not be able to provide social welfare and undertake infrastructure development which will result in social disequilibrium,” Wickremaratne said.
He said the government is trying to correct the situation by turning around the economic indicators. “People say we are taxing, taxing and taxing them.”
Exports too, which had been high as a percentage of the GDP in the 1970s, had plunged to a low level, he said. It has dropped from 33 percent at the dawn of the millennium to 12.6 percent by 2016. However, the trade deficit narrowed a little in 2018.
He said foreign loans which are either concessional or non-concessional are still only 15 percent in terms of market rate borrowing and today non-concessional loans are bigger than concessional loans. Inflation which had been around 8% dropped to around 1% in November 2017.
“The value of the currency which had dropped by around 8% before the political crisis in October dipped by 18-19 percent during the crisis. Most currencies lost value last year. However, we are relatively better off than many other currencies,” the Minister said.
According to the Minister, Sri Lanka not only lost opportunities to attract foreign direct investments but also had its interest cost from borrowing going up by a staggering amount, due to the political changes last year.
“We have two unique selling propositions, the strategic location and human resources. Continuous investments in developing human resources is the only way to get over the hurdles impeding economic growth,” the minister said, adding that what limits us is not the factors we usually talk about but rather our way of thinking which is reflected in public conversations.
The Minister said that at a recent debate on the Sena caterpillar, many tagged the invasion of the species as a conspiratorial act to sabotage local crops. Such conspiracy theories have been used since the 1930s and continue to-date. Speaker Karu Jayasuriya said, “We are celebrating 71 years of Independence but can we really be happy about our achievements? The three-decade war against terrorism was an excuse to ignore development.
The war is over, and today, we need to look forward to the future. Wrong policy decisions have been made in the past, and we need to correct them.”
The ‘October episode’ took the world by surprise. There was a national responsibility on the part of the Speaker to uphold democracy. Maintaining democracy is a painful exercise. “I had to uphold democracy at the expense of chilli water, chairs and various objects thrown at me,” Jayasuriya said.
This government was formed as a marriage of convenience. After a divorce, it is back together again. One party believes in private sector-led growth, while the other wants State-led economic growth, he said.
The trade deficit has widened because of non-essential imports. The policy of late President Ranasinghe Premadasa was ‘export or perish’, Jayasuriya said.