Heightened fears over Sri Lanka’s vulnerability to foreign debt

June 11, 2014 (LBO) – Sri Lanka may be more vulnerable to foreign debt than generally believed, amid rising foreign borrowings by both the state, state enterprises and also private entities, economists have said. Harsha de Silva, an economist and legislator said when parameters developed by UN’s Economic and Social Commission for Asia and the Pacific were applied to overall external debt; Sri Lanka appeared to in the safe zone according to official calculations.

Though the Central Bank had released a statement in May based on US-ESCAP debt indicators which appeared to show Sri Lanka was a less indebted country, he said other calculations showed that the situations was much more vulnerable.

He said the central bank calculations showed that Sri Lanka was moderately indebted when disbursed outstanding foreign debt was compared to gross national income at 37 percent.

But if foreign debt of state enterprises, banks were considered as indicated in a manual by UN-ESCAP indebted rose to 61 percent with external debt rising to 39.7 billion US dollars instead of 23 billion US dollars.

W A Wijewardene, a former deputy Central Bank Governor has made a detailed analysis on the matter on his weekly column