External debt up at US$ 28 bn; debt to GDP ratio rises to 79 %

Sri Lanka’s total external debt grew by 13.8 percent Year-on-Year (YoY) to US$ 28.4 billion in 2012, the Central Bank annual report for the year 2012 released yesterday showed.

The increase in external debt was mainly attributed to medium and long term loans entered into by the government, including the proceeds of the international sovereign bond and disbursements under the International Monetary Fund’s Stand-by arrangement facility.

Inflows to government securities and medium to long term foreign loans to public corporations were also cited as further contributing factors to overall debt levels.

As a percentage of GDP (Gross Domestic Product), the total outstanding external debt rose to 47.9 percent, against 42.2 percent in 2011.

Meanwhile, the country’s total debt to GDP ratio increased to 79.1 percent, reversing declines recorded in the recent past.

The CBSL cited exchange rate movements as being primarily responsible for the increase.

The annual report further showed that short-term debt increased by a drastic 23 percent, once again due to foreign holdings of government securities in 2012.

About 80 percent of government securities in question consisted of Treasury bonds with varying maturities of 1 year up to 20 years.

In nominal terms, outstanding government debt increased by 16.9 percent YoY to Rs. 6,000 billion while foreign currency denominated debt increased by Rs.207 billion, again due to exchange rate movement.

Additionally, foreign debt service payments as a percentage of receipts from the export of goods and services grew to 21.2 percent, against 12.7 percent in 2011. The Central Bank cited the repayment of medium to long term loans, particularly the US $ 500 million debut sovereign bond issue in 2007 alongside increasing interest payments and a “marginal decline in the export of goods and services” in 2012 as being primarily responsible for increased foreign debt service payments.

Despite across the board increases in the country’s debt levels, the CBSL cited the five of six external debt indicators defined in the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) as supporting the idea that Sri Lanka is a less indebted country.