The Finance Ministry claims that since 2016 all the money the Sri Lankan Government has borrowed has been to pay back old loans.
Finance Minister Mangala Samaraweera said that on 9th January 2015, as the Mahinda Rajapaksa family took-off to Medamulana, they flew past many of their white elephants.
“In Colombo, it was the Lotus Tower. As they landed, the empty and unused Mattala Airport, Hambantota Port, Cricket Stadium, IT Park, Cinema Park and Conference Hall must have come into view,” he said.
Samaraweera says the Rajapaksas left Sri Lanka in a debt trap. He says the Rajapaksas borrowed more foreign debt – at higher interest rates – than any previous Government.
“That would not have been such a complete disaster if the debt was invested in high-return projects. Instead these expensive funds were spent on White Elephant construction and consumer imports,” he said in a statement today.
Samaraweera said that when the Rajapaksas assumed office in 2005, Government debt per citizen was Rs. 113,131 and when they left it was Rs. 355,708.
“The real picture is even worse. Until 2007, virtually all of Sri Lanka’s foreign debt was on concessional terms. But from 2007 onward, Sri Lanka started to commit the ‘original sin’ of borrowing in a foreign currency loans on expensive commercial terms. In fact, in 2013, the Rajapaksa government directed the National Savings Bank to obtain $750 million from international markets at the highest ever interest rate of 8.9 percent. This is at a time when the global benchmark rate for that type of loan was 1.3 percent. The Chairman of NSB at the time, a respected civil servant, was removed and replaced with a batchmate of the then Treasury Secretary on the instruction of the then Finance Minister, Mahinda Rajapaksa,” Samaraweera said.
He says while the Government went on a borrowing spree on international capital markets, Government revenue plummeted. In 2005 Sri Lanka’s tax-to-GDP ratio was 13.7 percent. By 2014, it was 10.1 percent, one of the lowest in the world. As a result, expenditure necessary for long-run growth such as health and education suffered. And Sri Lanka needed to borrow more just to repay the Rajapaksa loans.
“In 2014 interest payments amounted to Rs. 436 billion, 24 percent of government expenditure. But because of all the Rajapaksa debt, especially expensive foreign debt, today interest payments are 31% share of government spending. In order to pay salaries, keep the lights on in hospitals and run the country we have had to borrow just to pay back our old loans. The whole country should know that since 2016, all the money we have borrowed has been to pay back old loans.” the Finance Minister said.