The servicing of public debt soaked up all of Sri Lankan government revenue in 2013, The Sunday Times reported.
That the government is having to borrow to meet its debt repayments is itself increasing the debt burden – even as state revenue is falling, the paper said.
Sri Lanka’s much-vaunted growth in GDP “has been achieved by increasing foreign and domestic debt and cutting developmental expenditure [and thus by] undermining macroeconomic fundamentals,” the paper warned.
Foreign direct investment (FDI) in 2013 fell from the year before to US$ 916 million, mostly in hotels, the paper also said.
Highlights from the Sunday Times’ analysis:
“The servicing of the public debt is the highest expenditure of the government [and] accounted for nearly one half (49.6 per cent) of government expenditure in 2013 and soaked up all of government revenue.
“That the servicing of the public debt exceeds last year’s revenue (102 per cent) means that the government required borrowing to even service the debt.
“The large debt servicing burden is itself a cause for increasing public debt as other government expenditures have to be met by borrowing.
“Meanwhile government revenue has declined from 13.9 per cent of GDP in 2012 to just 13.1 per cent in 2013.
“In 2013 FDI declined by 2.7 per cent to US$ 916 million with most investments being in hotels. The inability to attract FDI is a constraint on … investment for growth and leads to greater dependence on foreign debt that exacerbates the debt problem.
“Serious weaknesses in the fiscal balance, growing public debt, high debt servicing costs, the large foreign debt whose servicing costs are straining the external finances and policy stance with respect to exchange and interest rates are among the fundamental weaknesses of the economy.”