Sri Lanka should watch debt, contingent, liabilities: IMF

Feb 26, 2013 (LBO) – Sri Lanka should be careful about mounting external liabilities and reserve adequacy, with national debt already on the “high side” at over 80 percent of gross domestic product, the International Monetary Fund has said. Sri Lanka’s official debt to GDP ratio is expected to climb slightly to 81 percent in 2012 from 78.5 percent last year after the economy slowed following a balance of payments crisis triggered mainly by credit taken to subsidize energy tariffs.

The debt to GDP ratio is down from the nearly 100 percent levels seen a decade ago.

“But at 80 percent of GDP it is on the high side,” IMF mission chief to Sri Lanka John Nelmes said earlier this month.

“It is something that will require attention which will require fiscal consolidation, which is the government’s aim.

“Our debt sustainability analysis shows that under baseline scenarios of those ratios should decline.”

Nelmes says Sri Lanka is now being compared to emerging markets that are “more advanced.”

“Now what we are really doing shifting the comparison of Sri Lanka towards a group of countries that are more advanced. so in essence we are looking at a more optimistic set of comparator countries.

“So these are compariso