The new year marks the imminent requirement on Gotabaya’s government to pay back 875 billion Sri Lanka rupees of foreign debt due October 2020.
Colombo remains heavily burdened with foreign debt, with the Chinese, in particular, having invested billions in major infrastructure projects ranging from power stations to ports. And as Sri Lanka’s economic crisis worsened, the island was forced to hand over control of Hambantota Port in a debt-for-equity swap with Beijing in 2017.
UNP MP Dr Harsha De Silva described the government’s aim to attempt “ to repay this debt with our foreign reserves. But if they do this, it is wrong. The government will find it hard to raise debt, due to negative ratings”.
Furthermore, Economist Fernando has highlighted that the alternative action of Gotabaya obtaining more debt to repay the current debt will only prolong this issue and not find an effective resolution.
Whilst on the campaign trail, Rajapaksa promised to halve value-added tax (VAT) and abolish other taxes to induce growth within the Sri Lankan economy. Finance ministry officials stated the cuts could lead to a loss of more than 600 billion rupees ($3.31bn) in tax revenues, which would add fuel to the fire of the debt troubles that Sri Lanka faces.
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