COLOMBO (Reuters) – Sri Lanka’s government borrowing has risen sharply since January, central bank data showed on Monday, as the new government seeks to woo voters and strengthen its grip on power at a parliamentary election.
The government has sharply increased state sector wages and lowered duties on key commodities, putting pressure on government finances and pushing yields on Treasury bills up by between 76 to 82 basis points (bps) since Jan. 7.
Having won a presidential election on Jan. 8, President Maithripala Sirisena appointed Ranil Wickramasinghe as prime minister, though he lacks a majority in the 225-seat parliament.
Sirisena has pledged to hold parliamentary elections, which could take place before the end of June – a year ahead of schedule.
The total outstanding stock of T-bills and T-bonds rose by 216.6 billion rupees ($1.63 billion) in the first three months of this year.
Total outstanding dollar-denominated Sri Lanka Development Bonds (SLDB) jumped 18 percent in the first three months with the government borrowing a net 70 billion rupees worth SLDBs.
Finance Minister Ravi Karunanayake said he will seek parliamentary approval on Tuesday to raise the threshold limit in treasury bill borrowing to 1,250 billion rupees ($9.4 billion) from an earlier 850 billion rupees. As of Wednesday, outstanding treasury bills totalled 829.2 billion rupees.
Government spokesman Rajitha Senaratne told Reuters on Friday that the government needs to borrow more to pay contractors who took on debt in order to complete ambitious infrastructure projects during the previous administration’s tenure.
Sirisena has ordered a review of all infrastructure projects under the previous government, alleging corruption.
Market analysts said the pressure on government finances was also due to a delay in a planned sovereign bond issue of up to $1.5 billion.
Roadshows to test investor appetite found some fund managers were reluctant to buy the bond before the election, according to analysts, though there were still some who favoured a eurobond issue this month.
($1 = 132.9000 Sri Lankan rupees) (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Simon Cameron-Moore/Ruth Pitchford)