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Sunday, 24 August 2014

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'External debt: Long-term outlook stable'

The Sri Lankan economy is on a strong, sustainable growth path and external debt of the country as a percentage of the GDP is declining gradually and is at a healthy position, said Private Transport Service Minister C.B. Rathnayake.

He said that allegations against government policies and the state of the economy based on the debt ratio is irrational and misleading.

“In 1948, our external debt was only 4.4 percent of the GDP and it increased with the development of the country as we had to finance various development programs. There were some periods when the external debt ratio exceed 100 percent.

In 2003, our foreign debt was 102 percent of GDP and by 2013 it had come down to 78 percent of GDP. Our target is bring it down to 65 percent by 2016,” the Minister said.

International financial institutions such as the IMF and other independent analysts do not share the politically biased, baseless criticism of our foreign debt position, he said. Economists recommend maintaining the external debt ratio at below 80 percent.

“According to classifications of independent rating agencies such as Fitch, S and P and Moody's, our external debt long-term outlook is stable. According to the UNESCAP Debt Management Manual none of our financial institutions have been placed at extreme risk positions,” Minister Rathnayake said.

Critics should look at how the government uses dollar loans. The Government invests these monies on crucial infrastructure development projects and the benefits are long-term. Borrowing capacity of a person or a country depends on economic feasibility. In the recent past, Sri Lanka has been achieving a high economic growth rate close to 7 percent and inflation has been maintained at below 5 percent. The strong external reserve position and the strength of the financial sector too should be considered before criticising the external debt position. Sri Lanka successfully manages its external debts and there is no issue with regard to debt servicing, he said.

- GW

 

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