COLOMBO (EconomyNext) – Sri Lanka will not default on off-budget borrowings from banks by the last regime, though they did not appear to have parliamentary approval, Deputy Economic Policy Minister Harsha de Silva has said.
The Mahinda Rajapaksa regime borrowed large volumes of money from state and private banks for state agencies including the Road Development Authority which does not generate revenue on its own.
De Silva told parliament on June 09, the borrowings did not have parliament approval.
"The government has borrowed from state and private banks, without any parliamentary approval," de Silva told parliament on June 09.
There appeared to be no procedure laid down to recover the loans, de Silva said, though the banks believed that there was.
"As a responsible administration we will not allow these banks to fall," de Silva said. "But in the future we will not allow state or private banks to get into to such a risky situation."
According to data tabled in parliament by de Silva as of December 2014, the government had borrowed 1,402 billion rupees from licensed commercial banks through Treasury bills, bonds, dollar denominated Sri Lanka Development Bonds and overdrafts with parliamentary approval.
Another 379 billion rupees had been borrowed from state-run National Savings Bank.
Several agencies including the RDA, National Water Supply and Drainage Board, a shipping company and Sri Lanka Land Reclamation and Development Corporation had taken more loans off-budget.
There were also 29.8 billion rupees of unsettled letters of credit due to Bank of Ceylon and 44.1 billion rupees of letters of credit due to Peoples’ Bank relating to spending by the military, fertilizer and the presidential secretariat.
The data showed 206 billion rupees of ‘off-budget’ borrowings.
However finance ministry data has shown that there were more borrowings from banks especially to the Ceylon Petroleum Corporation, Ceylon Electricity Board and other agencies.
The Treasury had issued guarantees totalling 556 billion rupees including 91 billion in 2014 alone relating to such credit. By end 2015, 440.3 billion rupees related to such borrowings were disbursed and outstanding.