Sri Lanka’s new liability management law presented in parliament

ECONOMYNEXT – A liability management law was tabled in Sri Lanka’s parliament to improve public debt management, enabling the government to raise more money than what is needed to finance the budget deficit to help fund debt repayments.

Funds raised under the new liability management bill, presented by the Ministry of National Policies and Economic Affairs, to repay public debt will be exempt from the application of the provisions of the Appropriation Act.

The objective of the law is to “manage public debt to ensure the financing needs and payment obligations of the government are met at the lowest possible cost over the medium to long term consistent with a prudent degree of risk.”

It allows Parliament to approve raising funds during a particular financial year not exceeding ten percent of the total outstanding debt as at the end of the preceding financial year.

Loans raised under the law are to be maintained in ‘ring-fenced’ accounts at the Central Bank of Sri Lanka or at a licensed commercial bank and will only be used for refinancing and pre-financing of public debts.

Central bank governor Indrajit Coomaraswamy has said the new liability management law is being introduced since the present law does not enable the government to raise money in excess of what is required for that particular year, which prevents it raising extra money for liability management.

The new liability management bill will enable the borrowing cap to be exceeded for specific purposes like liability management, Coomaraswamy said.
(COLOMBO, February 20, 2018)

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