Foreign commercial debt jumps 36.2% in 18 months

Sri Lanka’s outstanding foreign commercial loan has jumped 36.2 percent within 18 months through end-June this year, an official document showed yesterday, as the island nation has been increasingly borrowing for post-war infrastructure revival.

Total outstanding foreign commercial loan has risen to more than Rs.1.04 trillion (US $ 7.93 billion) by end-June 2013 from Rs.764.5 billion (US $ 5.83 billion) at the end of 2011, a parliament document seen by Reuters showed.

The US $ 59 billion economy’s total debt in the same period has risen 27 percent to Rs.6.52 trillion, while the total foreign debt including the commercial loans had risen 23.7 percent to Rs.2.88 trillion, the data showed.

Rating agencies and economists have warned of a potential risk due to increasing external commercial debt.

But the International Monetary Fund last week said the current debtto-GDP ratio of around 80 percent was not alarming, though the government needed to strengthen a “policy buffer” to face contingencies.

Government critics say corruption has contributed to expensive infrastructure projects, resulting in heavy commercial borrowing.

The island nation, however, has aimed to reduce the debt-to-GDP ratio to 65 percent by 2016.

Sri Lanka has been borrowing from the international capital market since 2007 besides other commercial borrowing, mainly from China, to revive longneglected infrastructure since the end of a 26-year war against Tamil separatists in 2009.

Sri Lanka is not eligible for concessional financing since it had been graduated to a lower-middle income country status in January 2010, according to an IMF classification.

(REUTERS)