Sri Lanka to set up debt management office in Treasury

ECONOMYNEXT – Sri Lanka’s cabinet of ministers had cleared the setting up a debt management bureau as a separate unit in the finance ministry, the state information office said.

Sri Lanka’s domestic and foreign debt securities are now sold and managed by a unit in the Central Bank while foreign loans are raised by the external resources department of the finance ministry.

The cabinet has also cleared the drawing of a debt management law.

To develop the institutional framework, a five member debt management committee chaired by the impermanent secretary to the Treasury will be appointed.

Sri Lanka national debt has been rising, partly due to currency depreciation from liquidity shocks delivered to the credit system, ostensibly for monetary policy purposes, analysts have said.

However balance of payments crises in the past have been created due to so-called fiscal dominance and conflicting obligations of the central bank to give the lowest rate for government securities, which may be below the market clearing rate determined by private and state credit demand. (Colombo/Oct16/2019)