(
December 24, 2012, Colombo, Sri Lanka Guardian) The average national debt
shouldered by each Sri Lankan has risen by 25% to reach Rs. 308,171 (US $
2,371), from end of last year’s Rs.245, 980 (US $ 1,892), the monthly economic
statistics released by the Central Bank of Sri Lanka (CBSL) showed.
Referred
to as ‘Debt Per Capita’, in economic terms is calculated as total outstanding
government debt divided by the mid-year population of an economy. According to
the latest figures by the Department of Census and Statistics, the population
in 2012 is 20,277,597.
The
total outstanding government debt which stood at Rs. 5,133 billion last
December increased by Rs. 1,115.6 billion to reach Rs.6,248.9 billion during
the first eight months of this year. The total domestic debt increased by Rs.
449 billion, up 16 percent to reach 3,253 billion and foreign debt by Rs. 666.5
billion, up by 28.6 percent to record Rs. 2,995.8 billion during the period.
According
to economists, high debt cost amid slow growth in export earnings (8.3% YoY)
against growth in imports (11.2% YoY) in the first nine months could lead the
country in to a foreign debt trap situation, as the country might opt for
foreign borrowings to service earlier debt, and as a result the foreign debt
servicing cost (capital + interest) is also expected to surge substantially.
The
Budget 2013 projected a fiscal deficit of 5.8% of GDP proposing to rely heavily
on domestic sources (83% of total deficit which amounts to Rs.507.4 billion) to
finance the deficit while Rs.143 billion and Rs.445 billion is expected to be
incurred as capital repayment and interest respectively.
Nevertheless
according to the budget 2012, the government has exceeded the borrowing target
for the full year which was Rs. 1,104 billion. This demonstrates the poor
fiscal performance where the budget deficit reached to 6.44% of GDP last
September whereas the full year target is to achieve 6.2%.
On
the banking sector, based on economic indicators released for October 2012 by
CBSL’s Statistics Department, the total loans & advances of commercial
banks have grown by 26.5 percent YoY in September to reach Rs.2, 205 billion.
This is a reduction from the 28.5 percent YoY growth in August.
The
banking sector credit grew at a rapid pace in 2011 above 34% and as a result
interest rates were raised and 18% credit ceiling was imposed in February 2012
to contain growth and avoid the overheating of the economy. However in a
surprised move, CBSL last week cut policy rates by 25 basis points and
announced the lifting of the credit ceiling by the year end to probably oil the
wheels of economic growth.
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