Overtaking China, Japan became the single largest development finance provider to Sri Lanka during the first four months. The total financing commitment made by the bilateral development partner was as much as US $ 500 million during January to April 2013, almost the total amount provided by Japan during the entire year of 2012, according to the Finance Ministry.

According to the mid-year fiscal position report, during January - April 2013, out of the total US $ 457.3 million committed by Japan, 94 percent or US $ 429 million were loans while the balance US $ 28.3 million was grants. The corresponding amount during 2012 stood at US $ 524 million.

China which topped the list last year with over US $ 1 billion in loans to Sri Lanka came second during the first four month to April this year with a total financial commitment of US $ 354.5 million. What is notable here was that China has provided only loans to Sri Lanka with no grants both in 2012 and 2013.

Meanwhile during the first four months, the development partners and lending agencies to Sri Lanka have committed as much as US $ 1,027.8 million in support of ongoing public investment program. Further, out of these total commitments, US $ 996.7 million came as project loans while US $ 31.1 million were grants.

 Foreign financing commitments to Sri Lanka have been growing at an annual average of 19 percent since 2006 and in 2012 a total of US $ 3,152 million was received of which US $ 2,789 was project loans and US $ 363 million grants.

Of the total commitments during the period under review, 44 percent of funds had been committed by Japan followed by 35 percent from China. Others include 5 percent by Hungary, 4 percent each by United Kingdom and Asian Development Bank. From the total commitments recorded during the period under review, 90 percent was for infrastructure development projects. The capital expenditure during the first four months increased from 2.1 percent of GDP to 2.3 percent.

The government reiterated commitment to maintain its share of capital expenditure to 6.0 percent of GDP per annum. With the country reaching middle income status, the amount of concessionary loans have gradually declined by 44 percent from US $ 2,615 million in 2006 to US $ 1,475 in 2012 while nonconcessionary loans increasing six folds from US $ 260 million to US $ 1,677 million during the same period.

The average interest rate of foreign currency denominated debt excluding Sri Lanka Development Bonds increased to 3 percent in 2012 compared to 2.2 percent in 2011. In January, the government’s attempt to obtain US $ 1.0 billion financial support for infrastructure development projects from the International Monetary Fund failed as the multilateral lender declined to provide budget support.