No credit due for Sabry’s statement on bankruptcy

7 July 2022 09:21 am Views - {{hitsCtrl.values.hits}} 2 Bookmark

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In his statement, the MP claims that Sri Lanka’s assets are USD 400 billion, and commitments are USD 47 billion, therefore Sri Lanka is not bankrupt, but instead does not have the dollars to meet its day-to-day expenses.

In the context of national accounts, the term bankrupt is used colloquially; the formal accounting term used is insolvency. As such, to check this claim, FactCheck.lk interprets the MP as claiming that Sri Lanka is not facing insolvency but only a lack of liquidity (please refer the longer version of this fact check on our website for the distinction in the definitions for insolvency and illiquidity).

According to the IMF’s staff report for the 2021 Article IV consultation with Sri Lanka, which Sri Lanka has accepted, the country’s ‘public debt is unsustainable and points to a clear solvency problem’.

This assessment contradicts the MP’s claim that Sri Lanka is not insolvent (he uses the term “bankrupt”).

FactCheck.lk also consulted the Ministry of Finance (MoF) and the Central Bank Annual Reports to evaluate the MP’s claim that Sri Lanka has more assets than its liabilities. According to the MoF Annual Report 2020, total assets owned by the central government and key SOEs as of end 2020, amounted to only LKR 12,439 billion, i.e., USD 66.7 billion (at end of 2020 exchange rate). The reported value is a bit higher (LKR 13,109 billion) due to double counting of equity in state entities. This asset value would also have reduced in dollar terms subsequent to the currency depreciation since March 2022. Meanwhile, total public debt (central government debt and publicly guaranteed SOE debt) as of end 2020 amounted to LKR 16,427 billion, i.e., USD 88 billion. It would be even higher if unstated liabilities such as the already accrued public sector obligations on future pension payments were counted. Therefore, the net assets (assets minus liabilities) of the government are negative because stated liabilities of the government are greater than its assets. This contradicts the MP’s claim about the net assets position of the government as well.

The MP’s claim on the country not being bankrupt (meaning insolvent) and on the net asset position of the country, are both contradicted by the available facts. Therefore, we classify the MP’s statement as 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.

FactCheck is a platform run by Verité Research.
For comments, suggestions and feedback, please visit www.factcheck.lk.

Comments - 2

Roisin Sunday, 14 August 2022 11:21 AM

Even a former MP of FINANCE makes false statements about the economy!

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Keep going, do better Wednesday, 17 August 2022 07:51 PM

In law court he would say anything to win for his client. Misconstrue any fact to suit the purpose for what he is paid for. So he try to do for Lanka good But IMF and world economists, are unlike the Central Bank governor. They will independently know about Sabry falsehoods and then what for us? They have a view like: "Oh, Sri Lanka, utterly untrustworthy officials having country. They just want money, then they use it all projects nothing to do with what the finance was for." You destroy credibility of country with your poor performance. If you were in court, like this, all your clients would lose. So, however you put forward the truth or not, but try better to make it hard to find out. So silly foreigner can give us the money we all need. So your intention is good, but so far execution poor. But you better than most others, so still good man. Keep going.

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