Sri Lanka debt, interest costs, among highest in the world: Moody’s

July 23, 2014 (LBO) - Sri Lanka has a strong record in debt repayment, but interest costs and debt levels are high compared to revenues and private external commercial borrowings are adding to state borrowings, a report by Moody's a rating agency said. Some analysts have said that Sri Lanka's key problem is a large state, coupled with state enterprises in key sectors which were not paying taxes but are a drain on other tax-paying entities through subsidies.

The Treasury has made some headway in keeping expenditures in check, though current spending still exceeds revenues.

Meanwhile Moody's said state enterprise performance had improved over the past year especially with Ceylon Petroleum Corporation and Ceylon Electricity Board. SriLankan Airlines was now the biggest loss making state enterprise.

"The Sri Lankan government has maintained a default-free debt repayment record on both official and private creditor debt, even throughout the long civil war," Moody's said in a report on Sri Lanka's debt profile.

"Sri Lanka’s debt profile has some strong points, such as still-high low-interest concessional borrowing, relatively long tenors and a captive investor base that reduces rollover risk , but overall debt affordability is weak."