World Bank concerned over Sri Lanka external debt servicing

ECONOMYNEXT – The World Bank has drawn attention to a bunching up of foreign loan repayments in 2019, saying it is concerned over Sri Lanka’s ability to service the debt. 

Exchange rate depreciation and high interest rates have pushed up central government debt further, in spite of fiscal achievements, the World Bank said in its latest development update.

The debt profile also indicated significant exposure to a variety of risks, the bank said.

The non-concessional and commercial component of the government foreign debt rose from 1 percent in 2000 to 53 percent in 2016, the report said.

The interest rate risks on foreign currency debt has risen, average interest rates also increased and the average time to maturity has shortened, while reserve adequacy in relation to share of the foreign-currency commercial debt component has deteriorated, it said.

“Given the bunching in external Eurobond repayments, external debt service could become a matter of concern starting from 2019,” the World Bank said.

“These factors suggest that, in the absence of high growth rates seen in earlier years, fiscal consolidation and more efficient debt management are key to improving debt profile and bringing it back debt to a sustainable path.”
(COLOMBO, July 05, 2017)

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