{"id":59368,"date":"2016-10-04T21:46:38","date_gmt":"2016-10-05T03:46:38","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=59368"},"modified":"2016-10-04T03:34:37","modified_gmt":"2016-10-04T10:34:37","slug":"sri-lankas-debt-crisis-is-so-bad-the-government-doesnt-even-know-how-much-money-it-owes","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2016\/10\/04\/sri-lankas-debt-crisis-is-so-bad-the-government-doesnt-even-know-how-much-money-it-owes\/","title":{"rendered":"Sri Lanka’s Debt Crisis Is So Bad The Government Doesn’t Even Know How Much Money It Owes"},"content":{"rendered":"

Wade Shepard<\/a> , \u00a0<\/span>CONTRIBUTOR\u00a0Courtesy\u00a0forbes.com<\/span><\/em><\/span><\/h2>\n

Trying to develop its infrastructure to increase its economic potential has plunged Sri Lanka deep into a pit of debt<\/a>, pushing the country to the brink of bankruptcy<\/a> and prompting an IMF bailout<\/a>.<\/p>\n

The official estimate of what Sri Lanka currently owes its financiers is\u00a0$64.9 billion \u2014 $8 billion of which is owned by China. The country\u2019s debt-to-GDP currently stands around 75% and 95.4% of all government revenue is currently going towards debt repayment<\/a>.<\/p>\n

This debt situation is clearly not sustainable, but there\u2019s more:<\/p>\n

In addition to racking up large amounts of government debt via the usual channels, it\u2019s now becoming evident that the previous government also utilized state-owned enterprises to take out additional loans on its behalf<\/a>. While the full extent of this extracurricular lending seems unknown, current estimates peg it at a minimum of $9.5 billion \u2014 which is all off the books of the finance ministry.<\/p>\n

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We still don\u2019t know the exact total debt number,\u201d Sri Lanka\u2019s prime minister\u00a0admitted to parliament<\/a> earlier this month.<\/p>\n

\"\"<\/p>\n

Sri Lanka Prime Minister Ranil Wickremesinghe (L), Sri Lanka Cricket president Thilanga Sumathipala (C), Sports Minister Dayasiri Jayasekera (2R) and Law and Order Minister Sagala Ratnayake (R) in Colombo on September 20, 2016. (ISHARA S.KODIKARA\/AFP\/Getty Images)<\/p>\n<\/div>\n

Much of Sri Lanka\u2019s pile of debt accrued in the process of initiating an entire buffet of large-scale and extremely expensive infrastructure projects under the direction of former president Mahinda Rajapaksa.<\/p>\n

Between 2009 and 2014 Sri Lanka\u2019s total government debt tripled<\/a> and external debt doubled, as\u00a0the country engaged in a number of costly undertakings \u2014 such as attempting to build a new, multi-billion dollar\u00a0city in the middle of a jungle<\/a> (which includes the world\u2019s emptiest international airport<\/a>), constructing one of the most expensive highways ever made<\/a>, as well as other pricey endeavors, such as spending\u00a0$42 million\u00a0just to remove a rock from the harbor at Hambantota.<\/p>\n

But this doesn\u2019t necessarily mean that Sri Lanka\u2019s current administration is doing much better. Under President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, who came to office at the beginning of 2015,\u00a0domestic debt grew by 12% and external debt by 25%<\/a>\u00a0without<\/em> starting any new large-scale infrastructure projects.<\/p>\n

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\u00a0This fact has not gone unnoticed by former president Mahinda Rajapaksa, who recently issued a series of public taunts<\/a>, claiming that with the money the current administration has so far borrowed he could have built two Mattala Airports, one Hambantota Port, one Norochcholai Coal Power Plant, one Colombo-Matara Highway, one Colombo-Katunayake Highway, not one, but two Colombo Port cities<\/a> and one 500 MW Sampur Coal Power Plant\u2026\u201d<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

Sri Lanka may be in a debt trap that it can\u2019t get out of. This year alone $4.5 billion is due to foreign lenders and next year $4 billion is owed \u2014 bills which the country has not yet figured out a way to pay.<\/p>\n

Various interim solutions to the debt crisis have been proposed, such as offering debt-for-equity swaps<\/a> to countries, such as China, that Sri Lanka owes big and\u00a0privatizing and outright selling loss-incurring SOEs<\/a>, which have yet to receive much\u00a0interest.<\/p>\n

The IMF did agree to provide Sri Lanka with a $1.5 billion bailout<\/a>\u00a0in the form of a loan in April after the country agreed to a set of criteria to attempt to right the course of its wavering economy. However, as reported by East Asia Forum<\/a>, Sri Lanka\u2019s Central Bank has stated that it is their intention to secure an additional $5 billion in loans after receiving these funds \u2014 and corresponding seal of approval \u2014 from the IMF\u00a0as the debt trap continues getting deeper.<\/p>\n

Correction 10\/3\/2016: the $42 million rock was removed from Hambantota not Colombo. \u00a0<\/em><\/p>\n

I’m the author of Ghost Cities of China<\/a>. I’m currently traveling the New Silk Road doing research for a new book. Follow by RSS<\/a>.<\/em><\/p>\n

http:\/\/www.forbes.com\/sites\/wadeshepard\/2016\/09\/30\/sri-lankas-debt-crisis-is-so-bad-the-government-doesnt-even-know-how-much-money-it-owes\/#2d0c3af3a831<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Wade Shepard , \u00a0CONTRIBUTOR\u00a0Courtesy\u00a0forbes.com Trying to develop its infrastructure to increase its economic potential has plunged Sri Lanka deep into a pit of debt, pushing the country to the brink of bankruptcy and prompting an IMF bailout. The official estimate of what Sri Lanka currently owes its financiers is\u00a0$64.9 billion \u2014 $8 billion of which […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102],"tags":[],"class_list":["post-59368","post","type-post","status-publish","format-standard","hentry","category-economy"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/59368","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=59368"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/59368\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=59368"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=59368"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=59368"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}