Sri Lanka Economy
Posted on December 3rd, 2017
By Nalaka Godahewa
As you know , Sri Lanka gained independence in 1948. That was 69 years ago.
Since independence except for two years;1954 and 1955, Sri Lanka has always had a budget deficit. These deficits were mostly bridged through local and foreign borrowings.
When Mr Mahinda Rajapaksa became the 5th executive president of the country in 2005, the total national debt stood at Rs 2,222 billion
But when he left the presidency after 9 years the national debt had grown to Rs 7,391
Rs 5,169 billion had been added to the national debt within those 9 years. That is an average of Rs 575 Bn per year.
Where did that money go ? To understand this let us look at the accomplishments of the government during this period.
The 30 year long internal conflict ended in 2009 with the complete elimination of LTTE
A large number of development projects were completed while many others were already in progress.
Colombo city was rated the fasted growing city in Asia at a survey conducted by Master Card
Colombo Stock market was rated the most sustainable stock market in Asia by Capital Finance International of UK.
The Sri Lankan Economy had grown 4 times from USD 20 Bn to USD 80 Bn
The unemployment had reduced from 8.3% to 4.3%
Poverty had reduced from 15% to 8%
The total National Debt as a percentage of Economy had reduced from 102.3% to 70.3%
The inflation had reduced from 9 % to 3.3%
The house hold electricity availability had increased from 73% to 98%
Availability of clean drinking water had increased from 72% to 90%
Budget deficit had narrowed from 7.5% to 5.7%
The economy was growing as an average of 7% for three consecutive years.
But then the government changed in January 2015 . A new set of rulers assumed duties.
Almost 3 years later where do we stand now?
The National debt had been rising at an alarming rate.
By June 2017 the National Debt stood at 10,163 Billion.
That is a 37.5% increase in 2 ½ years.
Debts amounting to Rs 2,772 billion has been added in just 2 ½ years.
It is like increasing the national debt by Rs 3 billion every day
The previous government had borrowed Rs 5,169 billion over 9 years
The current government has borrowed 54% of that in just 2 ½ years.
Today the per capita debt burden of a citizen stands at Rs 462,000
Rs 126,000 of this per capita debt has been added by the current government over 2 ½ years.
Previous administrations borrowed money and built national assets for the future generations
Habours, Airports, Roads, Highways, Irrigation projects, Power plants,
What has this government done with all the money that they borrowed?
Think for your self…… where have we gone wrong ? How are we going to rectify the situation.
By Nalaka Godahewa
December 3rd, 2017 at 3:36 pm
But yet I have heard very well known Shaminder Ferdinando the news editior of the Island saying several time in News First program of Shaukatali’s program , that yahapalanaya and the previous goverments are both the same.
December 3rd, 2017 at 4:21 pm
The economy is in an absolute mess today and I predict a Sri Lanka recession for 2018. All good indices are down since 2014 and bad indices are up. Inconsistent economic policies between the President and the UNP regime is a big reason for this continuing mess.
The total debt above excludes direct borrowings by corporations (mostly loss making) that fall on the treasury anyway. That is another $21 billion at the end of 2014. When added the total debt of Sri Lanka in 2014 becomes Rs. 10,250 billion. Compared to 2005, it is nearly a 5 fold increase!
Debt to GDP is incorrect as it excludes direct borrowings in 2014 ($21 billion) which was near zero in 2005. This must be added. Then the debt to GDP comes closer to 100%.
A more correct index is debt repayment and interest payment to state revenue. Since 2012 this has remained around 100%. This means since 2012 the government has been paying almost all its income to settle loans and interest! There is no money to pay salaries, etc. This was borrowed. This is called the Debt Trap.
This is what happens to families of fathers with a drinking or gambling problem. The moment they get their salary, they have to repay their creditors leaving nothing for the family. They have to borrow again. Sri Lanka is in this trap since 2012.
War is not a reason for the increase in debt. Until 2009 we managed our debt position exceptionally well. Mahinda in particular. Our external borrowings when war ended was just $18 billion which climed to $55 billion by 2014.
A very large number of development projects failed.
This problem must be looked at without political partiality. I don’t see it happening. Otherwise it is the cycle of frying pan to the fire and back to the pan and the cycle continues.
Despite that, Dr Nalaka suits to be the president of Sri Lanka than anyone else. It is useless him becoming finance minister or an advisor. We don’t need any more advisors. We need a president who understands economics. The two are completely different. The former works for the economy while the latter whitewashes economic disasters of his political masters. War was won because Mahinda understood defence needs, not because he had fantastic advisors.
December 4th, 2017 at 8:30 am
Well said Mr. Godahewa.You have very correctly puts the facts before the people.
The traitor Ranil and the Yahapalanaya are now behaving like a cat that has crapped on concrete frantically scratching the concrete to cover up their misdeeds over the last three years. What a waste of our precious assets during the last three years. Most of it appears to have disappeared in the black hole of the bond scam and wasteful expenses such as the trips to Davos (one of the most expensive cities which hosts Billionaires) for Ranil and 40 others, plus $11,000 suit that Arjun Mahendran expensed on his expense account, and to cover up the massive debt of the UNP party and the massive handouts given by them to the MPs to win their vote for useless bills they passed in the Parliament. They have spent all their energy trying to track down the Lamborghini’s, Golden horses and the $18 Billion that they claimed MR had stashed away. Nothing has been done to develop the country. All the good projects were shut down such as the Port City and after calling the people who went to China to get loans “idiots” Ranil himself had to go to China on bended knees since nothing much came from the west except money to fight the election in 2015 via social media. Similarly, Libya and other countries too were toppled through so-called Arab Spring uprisings. Today those countries are basket cases. Ranil has no vision and no ideas except to listen to the IMF for Economic policy and the Western think tanks for ideas on how to humiliate and destroy most of Sri Lanka, the rural poor especially. Projects such as the Divinaguma were stopped and now this year they started the same project calling it Grama Shakthi. Sri Lanka which was self-sufficient in rice in 2014 has had to import rice to make sure the commission agents are getting their bata. There are squatters in the forest reserves and some of the forests have been cut to plant banana plantations and palm oil plantations. MR was trying to strengthen the people at the village level and make them self-reliant in every way. Ranil wants an export-oriented economy which will sell all our resources to rich countries for peanuts while the poor starve and our exporters become very rich.