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Sri Lanka’s foreign commercial debt more than doubles in 2009

Mar 05, 2010 (LBO) - Sri Lanka's foreign commercial debt has risen dramatically in 2009 as lender confidence increased after a deal with the International Monetary Fund and the fiscal deficit expanded, official data shows. Sri Lanka's total commercial debt, including defence loans accrued during a war with Tamil Tigers which ended in May 2009, rose to the equivalent of 410.
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6 billion rupees from 164.0 billion rupees in 2008 which is an increase of 150 percent.

Based on an end-December 2008 exchange rate of 113.13 rupees to the US dollar and end-December 2009 exchange rate of 114.3 rupees to the US dollar commercial debt had increased from 1,449 million US dollars to 3,589 million US dollars, up 147 percent.

Commercial debt's share of total foreign debt has also more than doubled to 23.3 percent in 2009 from just 11.3 percent in 2008.

In 2008 Sri Lanka's foreign commercial debt fell as the country ran into a balance of payments crisis and the government found it difficult to roll over maturing debt.

The foreign debt also includes more than a billion US dollars that flowed into rupee denominated Treasuries after a float of the domestic currency in April 2009 and a deal with the IMF in July restored credibility in Sri Lanka's peg with the US dollar.

The government also raised 500 million US dollars from a sovereign bond.

In 2009 Sri Lanka spent a record 1,043.2 billion US dollars in foreign debt service, made up of 815.
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3 million US dollars in principal and 227.9 million US dollars in interest.

Sri Lanka also repaid about 300 million dollars in foreign obligations soon after sovereign bond proceeds arrived in the country.

For 2010 the finance ministry said foreign debt service will fall to 810.6 million US dollars (554.3 million in principal and 227.9 in interest) and rise to 954.5 million US dollars in 2010 (652.3 million in principal and 302.2 million in interest).

In 2012 debt service will increase sharply to 1,539.4 million US dollars with the principal rising to 1,224.1 million with a 500 million US dollar repayment of a 5-year sovereign bond sold in 2007.

The latest official data shows that Sri Lanka budget deficit expanded to 10.3 percent of gross domestic product in 2009.

Sri Lanka is planning to sell another 500 million dollar sovereign bond in 2010, possibly after May.

In 2008 Sri Lanka is planning a budget with a deficit of around 8.0 percent of GDP before new revenue measures, according to a fiscal report.

Error corrected/increase 147 percent and 150 percent.

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