Sri Lanka getting hooked on debt, economists say

Nov 27, 2007 (LBO) – Sri Lanka’s government is becoming addicted to debt and putting at risk the country’s future, private sector economists said. “We’re on a slippery slope of debt,” says Harsha de Silva, an economist at the LIRNEasia think tank.

“If it continues the country is going to crash land. The economy will not be sustainable.”

The government’s total outstanding debt had increased by two-thirds in the past five years alone and it resorts to printing money when it cannot borrow anymore.

De Silva criticised the government’s recent 500 million dollar bond issue at an interest of 8.25 percent a year paid every six months with a bullet repayment in five years – by October 2012.

He was speaking on the current monetary environment and its effects on business at a meeting organised by the Sri Lanka Ceramics Council Monday.

Misled?

The government has hailed the dollar bond sale as a success, saying it paves the way for the private sector to access international capital markets and that the money would help fund infrastructure projects.

It also said that the island has an unblemished record of debt re