Lohan Ratwatte flat out wrong on vehicle loans

8 July 2021 12:00 am Views - 2361

 

In his statement, State Minister Lohan Ratwatte claims that (a) the credit line under which the vehicles were to be imported does not increase the country’s public debt, as a credit line does not involve spending public funds, and therefore, (b) the non-utilisation of the credit line would be wasteful.

FactCheck.lk evaluated this claim based on the definition and implications of grants, loans, and credit lines.
The Organisation for Economic Co-operation and Development (OECD) defines grants, loans, and credit lines as follows:

A grant is a transfer made in cash, goods, or services for which no repayment is required.

A loan is a transfer for which repayment is required.

A credit line is a type of loan that is repaid only to the extent that it is utilised.

For claim (a) to be correct the vehicles should be financed by a grant rather than a loan. The state minister refers to a credit line which is a type of loan, and not a grant. If the credit line is utilised, in this case to purchase vehicles, it would have to be paid back from public funds, and consequently increases the country’s public debt. 

On claim (b), by calling the non-utilisation of the credit line a “waste”, the state minister is representing the use of the credit line as benefit with no cost to the public, which is incorrect.  The state minister falsely described the credit line, which is a loan, as being a grant for which no repayment is required. Additionally, he falsely represented the cost to the public as being a benefit. Therefore, we classify his statement as BLATANTLY FALSE. 

*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment. 

 

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