ECONOMYNEXT – Sri Lanka’s Auditor General has bared an accounting fiddle where 186 billion rupees of loans taken by the Road Development Authority about 1.2 percent of gross domestic has been taken of the central government and listed as contingent liabilities, understating national debt.
The AG said there were 94 loan agreements with local commercial and specialized banks up to December 2018 and another US dollar loan of 35.45 million dollars listed under contingent liabilities.
But they were not contingent but actual liabilities which were settled annually from Treasury allocations.
The Auditor General said "the full responsibility of Loan Servicing of the amount would be held by the General Treasury" but it had "not been identified as a liability in the financial statements."
"Likely it had not been applied even in the computation of the annual liability limit," the Auditor General said.
The Road Development Authority has no revenue on its own except for fees charged on expressways, which have their own loans.
Critics had earlier pointed out that there was no case to list debt of an agency which clearly did not have any revenue to service the loans at the time the loan was initiated as a liability contingent on the agency being unable to pay due to some unforeseen future event.
The Auditor General said the highways ministry allocated a ‘sum equal to the loans and interest" to RDA which in turn accounted for them as ‘revenue’.
Analysts say the effect of the mis-classification is to show a lower budget deficit in the years the loans were actually taken and the roads built.
Sri Lanka’s budget deficit in the past decade would then be higher than the number declared.
At the same time the current the deficit now would be lower than the amount now reported, since the what is actually happening is not an expense but a loan repayment of loan taken for past expense.
The AG had also revealed that several other foreign loans that were not accounted for as central government debt saying the debt to gross domestic product ratio was around 87 percent.
The calculation did not include the 1.2 percent debt of the RDA. (Colombo/June13/2019)