Government's gross borrowings, by selling Treasury (T) Bills and T Bonds to the market are set to increase to Rs 1,043,878 million or to Rs 1.04 trillion, when the Central Bank of Sri Lanka (CBSL) on its website announced last Friday (17 July) that it plans raise Rs 24,000 million by selling T Bills to the market on Wednesday (22 July).
In the commensurate period last year the previous regime raised only a mere Rs 515,527 million on a gross basis by selling T Bills and T Bonds to the market. Therefore, the raising of a sum of Rs 1,043,878 million is a Rs 528,351 million or a 102.49% increase over similar gross borrowings made in the corresponding period last year by the previous regime.
Such increased borrowings are due to sluggish revenue growth vis-à-vis current expenditure, compounded by the government's desire to fulfil electoral pledges in the backdrop that there will be a general election on 17 August, 2015.
In related developments, government's foreign commercial borrowings are set to increase by 113.02% or by US$ 2.177.25 million year on year (YoY) to US$ 4,103.75 million this week, with its planned sale of a minimum of US$ 50 million worth of Sri Lanka Development Bonds (SLDBs).
These SLDBs include tenures of one year three months and two years respectively. The figure of US$ 4,103.75 million includes swap proceeds of US$ 1.5 billion received from the Reserve Bank of India where the pay back period is unknown, coupled with a US$ 500 million proposed commercial borrowing, where the bids are currently under evaluation.
Meanwhile, in the corresponding period the previous year, the former regime had only indulged in US$ 1,926.50 million of such borrowings. Increased foreign borrowings are fuelled by foreigners exiting from both the government securities market and the stock market due to the prevailing uncertain political situation besetting the country.Courtesy: Ceylon Financial Times 20 July 2015