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Oct 11, 2012 (LBO) - Sri Lanka's external financing has got diversified out of a traditional Western led donor group but the country was not just depending on China, despite such a perception building up, Treasury secretary P B Jayasundera said.
"Although there is a perception that we have only Chinese assistance for development, the country has got a much more diversified - much more than the 'Paris Club' kind of limited assistance," he told the alumni of Sri Lanka's University of Colombo.
The 'Paris Club' of donors were the key source of Sri Lanka's external funding when the country was wary of higher cost commercial financing and its per person economic output was lower.
In recent years Sri Lanka has moved to export import credit from several countries and also to international capital markets.
Jayasundera was delivering an oration in memory of Sujata Jayawardena, a distinguished former head of alumni association of the university.
Over the past five years, China has become a top lender to Sri Lanka and is on track to overtake Japan, the island's biggest lender after World War II.
Good Relationship
Sri Lanka has also got 2.5 billion US dollars from the International Monetary Fund following a balance of payments crisis in 2009.
The agency closed its office after Sri Lanka turned its back on prudent monetary and fiscal policy and tumbled into a high inflation, high deficit spending, energy price manipulating economic strategy in 2004, articulated mainly by the Marxist-nationalist JVP party.
Sri Lanka has a so-called Bretton Woods style soft-pegged monetary regime where foreign reserve sales are sterilized with printed money driving the country into frequent balance of payments trouble.
The IMF was created by the interventionist architects of the failed Bretton Woods system to help countries that printed money and got into trouble by trying to target both the exchange rate and interest rates at the same time.
"We did not have ideological problems for the government to work with the IMF," Jayasundera said
"We got the International Monetary Fund to stabilize the economy and put the country on a standby arrangement: the country's first ever successful stand by arrangement in terms of the full disbursements of the entire program was completed."
"And a good working relationship, at a political level, at a technocrat level was established and that is a critical building block that has come back."
Sri Lanka's previous IMF programs had been opposed by spending-happy sections of the elected political elite, either in power or in the opposition forcing them to be abandoned half way and inflationary deficit spending to resume.
Larger Loans
Jayasundera said Sri Lanka has moved up from the World Bank's very concessional International Development Association window loans to larger International Bank for Reconstruction and Development loans.
With the Asian Development Bank Sri Lanka had moved to larger loans from its OCR (ordinary capital resources) window.
"Japan our key bilateral lender has been expanded for infrastructure funding and many economic reforms," Jayasundera said.
"The UN development agencies work with their post conflict development frameworks, empowering the country's resource based from that front."
Under Jayasundera's watch, especially after the end of a 30-year war in 2009, Sri Lanka has upped its spending on infrastructure, modernising a crumbling, long neglected infrastructure including in former war zones with foreign financing.
"We have a huge support base from India which we never had earlier," he said. "A 200 million dollar credit line has become a nearly two billion long term credit on concessional terms particularly to develop the railway infrastructure.
Sri Lanka was also tapping export credit financing from many countries, led by China.
He said China was financial large infrastructure projects, in ports, power, airports, irrigation and road networks.
"Then we have the United Kingdom, supporting the construction of bridges and highway. Then we have France and Germany again supporting on much larger credit facilities for infrastructure development.
"We have just concluded with the United States again a funding for infrastructure for the water sector."
He said funds from Kuwait, Saudi Arabia and the OPEC was helping with long term investments.
"We have also graduated to the market. The country's has tested the 10 year market, the government itself has gone to the 10-year market," Jayasudera said.
"We no longer have 5-year bonds, we have 10-year bonds and three billion dollars basically in the international bond market.
Jayasundera said rupee Treasuries have also been opened to foreign investors allowing another channel of financing.
http://lbo.lk/fullstory.php?nid=585914543
"Although there is a perception that we have only Chinese assistance for development, the country has got a much more diversified - much more than the 'Paris Club' kind of limited assistance," he told the alumni of Sri Lanka's University of Colombo.
The 'Paris Club' of donors were the key source of Sri Lanka's external funding when the country was wary of higher cost commercial financing and its per person economic output was lower.
In recent years Sri Lanka has moved to export import credit from several countries and also to international capital markets.
Jayasundera was delivering an oration in memory of Sujata Jayawardena, a distinguished former head of alumni association of the university.
Over the past five years, China has become a top lender to Sri Lanka and is on track to overtake Japan, the island's biggest lender after World War II.
Good Relationship
Sri Lanka has also got 2.5 billion US dollars from the International Monetary Fund following a balance of payments crisis in 2009.
The agency closed its office after Sri Lanka turned its back on prudent monetary and fiscal policy and tumbled into a high inflation, high deficit spending, energy price manipulating economic strategy in 2004, articulated mainly by the Marxist-nationalist JVP party.
Sri Lanka has a so-called Bretton Woods style soft-pegged monetary regime where foreign reserve sales are sterilized with printed money driving the country into frequent balance of payments trouble.
The IMF was created by the interventionist architects of the failed Bretton Woods system to help countries that printed money and got into trouble by trying to target both the exchange rate and interest rates at the same time.
"We did not have ideological problems for the government to work with the IMF," Jayasundera said
"We got the International Monetary Fund to stabilize the economy and put the country on a standby arrangement: the country's first ever successful stand by arrangement in terms of the full disbursements of the entire program was completed."
"And a good working relationship, at a political level, at a technocrat level was established and that is a critical building block that has come back."
Sri Lanka's previous IMF programs had been opposed by spending-happy sections of the elected political elite, either in power or in the opposition forcing them to be abandoned half way and inflationary deficit spending to resume.
Larger Loans
Jayasundera said Sri Lanka has moved up from the World Bank's very concessional International Development Association window loans to larger International Bank for Reconstruction and Development loans.
With the Asian Development Bank Sri Lanka had moved to larger loans from its OCR (ordinary capital resources) window.
"Japan our key bilateral lender has been expanded for infrastructure funding and many economic reforms," Jayasundera said.
"The UN development agencies work with their post conflict development frameworks, empowering the country's resource based from that front."
Under Jayasundera's watch, especially after the end of a 30-year war in 2009, Sri Lanka has upped its spending on infrastructure, modernising a crumbling, long neglected infrastructure including in former war zones with foreign financing.
"We have a huge support base from India which we never had earlier," he said. "A 200 million dollar credit line has become a nearly two billion long term credit on concessional terms particularly to develop the railway infrastructure.
Sri Lanka was also tapping export credit financing from many countries, led by China.
He said China was financial large infrastructure projects, in ports, power, airports, irrigation and road networks.
"Then we have the United Kingdom, supporting the construction of bridges and highway. Then we have France and Germany again supporting on much larger credit facilities for infrastructure development.
"We have just concluded with the United States again a funding for infrastructure for the water sector."
He said funds from Kuwait, Saudi Arabia and the OPEC was helping with long term investments.
"We have also graduated to the market. The country's has tested the 10 year market, the government itself has gone to the 10-year market," Jayasudera said.
"We no longer have 5-year bonds, we have 10-year bonds and three billion dollars basically in the international bond market.
Jayasundera said rupee Treasuries have also been opened to foreign investors allowing another channel of financing.
http://lbo.lk/fullstory.php?nid=585914543
