ECONOMYNEXT – Sri Lanka’s cash surplus from extra borrowings in 2024 had topped a trillion rupees by October 2024, from 599 billion rupees in the beginning of the year, data on Finance Ministry report showed.
Cash inflows from tax and other receipts were 3,188 billion rupees, outflows for current spending were 3,734 billion rupees and capex 820 billion rupees, requiring borrowings.
Gross borrowings were 2,940 billion rupees by October and debt repayments were 1,121.5 billion rupees, leading to net borrowings of 1,818 billion rupees.
There was no breakdown to show whether the excess borrowings were in foreign currency, such as from foreign borrowings like budget support loans, kept to make foreign loan installments falling due, or in rupees.
To make lumpy payments foreign exchange reserves have to be built by the Treasury slowly through various foreign loans or taken from the central bank.
Extra domestic borrowings, deposited in local banks, if eventually called for in large quantities, (so-called buffer strategy) leads to monetary instability and external pressure, of bids to auctions are rejected, and repayments are made with window borrowings, analysts had warned.
Before cash management improved under the IMF program, after default, Sri Lanka’s finance ministry had overdrafts with state banks, which were sometimes also re-financed from window borrowings through the policy rate, with similar outcomes on the rupee. (Colombo/Feb18/2025)