ECONOMYNEXT – Sri Lanka’s foreign debt, including sovereign bonds held by domestic investors were marginally down to 37,040 million dollars by March 2023, from 37,334.5 million US dollars in December, official data showed.
The number was only about 500 million dollars up from 36,435 million US dollars released in a debt update last March, despite the World Bank, ADB and the International Monetary Fund giving budget support loans since then.
Multilateral debt was 11,716 million dollars in March, compared to 11,783 in December.
There were no arrears as debt to multilaterals continue to be serviced and the are providing budget support loans on an on-going basis.
Bilateral debt was 10,588.6 million US dollars, with 2,167.5 million dollars in arrears.
The largest creditor was Exim Bank of China with 3,993 million dollars of which 903 million was in arrears.
Japan was owed 2,359 million dollars of which 291.2 million was in arrears.
Separately, among commercial creditors a China Development Bank loan of 2,185 million dollars was in arrears by 463.3 million dollars.
However sovereign bond holders who were owed 12,550 million dollars, were in arrears by 3,250 million dollars.
Sri Lanka is currently only repaying multilateral debt.
Out of a total of 37,040.7 million dollars of external debt, including local holders of sovereign bonds, 5,881 million dollars were in arrears by March.
Out of a total of 37,334.5 million dollars of external debt in December, 4,451 million dollars were in arrears by December.
Sri Lanka’s foreign debt denominated in currencies like the Yen or French Franc or even SDR may also change in dollar terms due to cross currency movements.
In the first quarter of 2024, Sri Lanka has also collected reserves permitted by deflationary monetary policy.
Frome December to March, gross reserves rose by 480 million US dollars to 4,960 million US dollars, reducing the net debt position.
Up to April, gross official reserves have risen by 980 million dollars to 5,491 million dollars, further helping the net debt position
In addition, the central bank on its own has also been settling IMF and Indian debt, improving the net international reserve position over the past year. However quarterly data is not available.
As long as deflationary policy is maintained (at a market rate), the central bank can collect reserves to repay its swaps.
The government can also exchange rupee cashflows for dollars as long as monetary policy is not inflationary (rates are not cut by liquidity injections).
To repay debt or collect reserves (by appropriating savings of the people) some domestic investment has to be reduced, by maintaining monetary stability at an appropriate interest rate.
(Colombo/June03/2024)