July 24, Colombo: A legislator of Sri Lanka's main opposition United National Party (UNP) says there would be a devastating impact by the government's commercial borrowings.
UNP parliamentarian and economist Dr. Harsha de Silva has said that the commercial borrowings to pay for loans would have a devastating impact on the country and it would be the general public who would finally have to shoulder the burdens.
He has noted that the current administration has borrowed the highest amount of monies in the country's history and it was not a proper move.
The parliamentarian pointed out that the government has obtained a US$ 1 billion commercial loan to pay a US$ 500 million credit due to the HSBC Bank. The loan monies have been used to repay the HSBC credit and to pay several other loans, he explained.
The International Monetary Fund (IMF) approving the last installment of the US$ 2.5 billion loan agreement noted that interest payments on government debt are higher than budgeted for 2012 adversely affecting fiscal revenues.
However, the global lender agreed that Sri Lanka's current monetary policy stance is appropriate.
The government has borrowed heavily from foreign countries and commercial institutions to invest in the development of the country's infrastructure that was neglected during the 30-year war.
Sri Lanka has sold five sovereign bonds since 2007 on international markets raising US$ 4 billion to finance development projects and to pay off short-term debt with high interest rates.
The Central Bank last week sold a US$1 billion, 10-year Eurobond at a 5.875 percent yield.
Sri Lanka has been successful in progressively lowering the cost of the bonds since its first offering in 2007. Sri Lanka's previous four Issuances - US$ 500 million 5-year bond in 2007, US$ 500 million 5-year bond in 2009, US$ 1 billion 10-year bond in 2010 and US$ 1 billion 10-year bond in 2011 were priced at yields of 8.25%, 7.40%, 6.25% and 6.25% respectively.
Meanwhile, according to a report submitted in the parliament by the Senior Minister for International Monetary Cooperation Dr. Sarath Amunugama loans taken by the country in the past 15 years from foreign countries and institutions amounted to US$ 15.39 billion.