Individual debt burden soars to Rs. 1.2 Million

Government says rupee’s decline results in higher per capita debt 

• The government is expected to face increased pressure to implement effective fiscal policies and debt management strategies to address this growing economic challenge

By Sheain Fernandopulle  

Sri Lanka’s net per capita debt has reached an alarming figure of Rs. 1.2 million as of December 31, 2022, according to the annual report of the Auditor General marking a staggering increase from Rs. 264,811 recorded on December 31, 2012.  

The comparison of total public debt against the median annual population reveals a noteworthy trend, showcasing a 62.53% increase in net per capita debt when compared to the previous year. As of December 31, 2021, the net per capita debt stood at Rs. 759,471, indicating a rise of Rs. 474,887 in just one year.  

Net debt per capita is a crucial metric that measures the value of a government’s debt in terms of the amount attributed to each citizen within its jurisdiction. The sharp rise in this figure raises concerns about the financial burden borne by the average Sri Lankan citizen.  

In addition to the surge in net per capita debt, the report also highlights a significant increase in net borrowings, both domestic and foreign. The figures reveal a spike of Rs. 1,865,589 million in net borrowings, further contributing to the country’s mounting debt burden in 2022.  
Moreover, the payment of interest on loans has witnessed a substantial uptick, increasing by Rs. 516,807 million or 49.30% in the year under review as compared to the preceding year. This emphasizes the challenges Sri Lanka faces in managing its debt obligations and servicing its financial commitments.  

Economists and financial experts are closely monitoring these developments, expressing concerns about the long-term implications of the rising debt burden on the country’s economy. 
In this context, the government is expected to face increased pressure to implement effective fiscal policies and debt management strategies to address this growing economic challenge. 
Responding to the reports indicating that the per capita debt had exceeded Rs 1.2 million, State Minister for Finance Ranjith Siyambalapitiya said the increase in debt burden resulting from the rupee’s decline has had a significant bearing on the scenario.  Responding to questions from journalists, the minister stressed the significance of looking beyond mere numerical calculations to comprehend the full context of the situation.   

Highlighting the numerical approach of dividing the total public debt by the population, the minister acknowledged its importance but urged for a more comprehensive explanation.   “Drawing attention to the depreciation of the rupee by approximately 45% between 2020 and 2023, the minister explained how it drastically impacted the value of the debt.  The increase in debt burden resulting from the rupee’s decline has had a significant bearing on the current scenario, accounting for roughly 90% of the issue at hand,” he added.