3 October, 2022

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Development & Loans: Truth Behind The Statement By The Prime Minister

By Champika Ranawaka

Champika Ranawaka MP

At the inauguration ceremony of New Kelani bridge, the Prime Minister said that the Previous “Yahapalana Government” had done no development projects but just borrowed money. During his tenure as the President he had done massive development projects such as the Port, Airport and the Dakshina Highway.

The political rhetoric on “Viyathmaga” stages during the last elections was that the Rajapaksha government had a 6-7% economic growth during the 2005 – 2015 tenure and the Yahapalanaya only had a 2-3% economic growth. for the country to go back to a 6-7% economic growth, Rajapaksas should become the rulers again.

Even some monks were saying that the Gotabaya government is forced to repay the loans taken by the Yahapalana Government.

The Truth

The debt crisis of our country is principally linked to the foreign debt repayment. The dearth of US dollars and the restriction on importing goods has created a black market and the shortage of goods.

Our foreign debt bouquet is heavy with commercial borrowings with no concessional periods and high interests.

The distribution of high interest commercial borrowings with no concession over repay period, among foreign debt as a percentage.

Year        Debt (%)

2000       3

2001       9

2002       7

2003       6

2004       8

2005       9

2006      12

2007      16

2008      19

2009      23

2010      28

2011       30

2012      27

2013      35

2014      40

2015      47

Accordingly, the 8% borrowings which were rigid and high interest at the start of Mahinda Rajapaksha regime became 47% by the end of 2015

As a result the country went in to a vicious cycle from 2016 to borrow from commercial lenders for a high interest without any concessional period to repay. by the end of 2019 the percentage became 58%. further, a sizable proportion of those borrowings were to repay previous debts.

Year     Foreign debt repay (USD million)    Foreign borrowing (USD million)       (%)

2010                   1540                                                  3529                                           44

2011                    1766                                                  3467                                            51

2012                   2139                                                   3314                                            65

2013                   2127                                                   3242                                            66

2014                   2218                                                   3727                                            60

2015                  3066                                                   6554                                            47

2016                  4179                                                    5248                                            79

2017                  4469                                                    4919                                            91

2018                 5838                                                     6141                                            95

2019                 5324                                                     5582                                           95

This shows that by 2017-2019, 90-95% of foreign borrowings were for debt repayment.

Who’s Loans?

The percentage of loan repayment against the year of borrowing

Year of borrowing            2020      2021

1956-2004                        15.7%    14.6%

2005-2014                       69.8%    77.4%

2015-2019                        19.6%      8.0%

This shows the development bubble that was created during 2005 -2014 which saw us the Lotus tower, Port, Airport at Mattala and the Highways, has caused us to repay debt since 2016 and the current foreign currency crisis in 2021 – 2022 is a direct result.

Net Foreign assets (Central Bank – NFA – CBSL) and Net foreign assets (Central Bank+Banking sector) NFA (CBSL+Banks) and official foreign reserves.

2014        2019      2021

NFA (CBSL)                       5250      4933      -794

NFA (CBSL+Banks)              115         537     -3611

Official foreign reserves   8208       7642      1500

This shows that the Central Bank and the Banking network is at the brink of foreign currency crisis.

We are left with just 1500 million USD including the gold reserves ( plus the export and other income) to repay approximately 7 billion USD in 2022. The country is at the verge of bankruptcy in the next few months.

The government is “fiddling while Rome burns” when the need of the hour is intelligent economic management.

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Latest comments

  • 11
    2

    So what can you do?

    The next government faces the same problem.

    SL faced a similar problem with trade deficit in 1982. Thankfully by the start of 1984 it was resolved. Obviously GR is not as smart as JR.

    JR’s solution boosted SL’s foreign inward remittances for a long time to come. SL had $$$ despite the war and reduced tourism. Ingenious!

    Of course you cannot make omelette without cracking eggs.

    • 6
      2

      Why are the US citizens, Goat and Basil Rajapaksa Brothers purchasing 14 million Pfizer vaccines when the majority of the Lanka population is already vaccinated already? Pfizer’s mRNA vaccines are dangerous and Phizer is a corrupt as the WHO and US regime.
      Are the US citizens Basil and Goat who run this miracle of Modayas called Sri Lanka trying to help BAIL OUT the DEBT TRAPPED US economy which has printed $9 Trillion in the last 2 years of Covid-19 biowarfare against the world so that Black Rock Hedge Fund and its fronts like Adani and Ambani can asset strip the Global South and re-boot colonialism with a Covid MASK to make America and its White EU allies great again, and destroy the rise of Asia as the growth Hub of the World?
      Sri Lanka in the midst of the Indian Ocean is in the midst of Full Spectrum Dominance US Hybrid, cyber, maritme trade war to control all systems and turn the country into a colony as the US is the biggest ROgue State in the world and trying to destroy China and Asia. Sri Lankan politicians and parliament is a puppet show,, funded and controlled by the US today!

  • 11
    1

    The huge white elephant infrastructures are painfully obvious even without the numbers.

    • 6
      2

      Not exactly. Those were not commercial loans. They were bilateral loans from Japan/ADB, China, etc. They are not the problem. The problem is market loans (bonds).

      These were wasted in the north (mainly) to build houses, schools, internet, telecom and other consumption (non business) things. No exports from the north. No income tax either. How to repay?

      What’s worse, this rapid development reduced foreign money the north used to get during the war. There was a reduced need for people in the north to depend on them after local economic activities in the north surged.

      • 4
        1

        The resettlement of the North was of dire necessity. That’s the price to pay for a united country. But in the midst of recovery after the war (in fact, even before the recovery), was the building of the huge infrastructure projects. And those bilateral loans still need to be paid back.

        • 1
          2

          I agree it is the price to pay for a united country and that is the price SL is paying now. Not worth it at all.

          Rebuilding 30 years of war destruction and neglect in 3 years is economically unsustainable and utterly foolish. What does that add to SL’s exports, foreign earnings? Absolutely nothing.

          Haste makes waste!

          Rajapaksas wasted so much money in the north to win the NPC election in 2013 and show to the world Tamils loved them! Thankfully they lost badly.

          Look at the charts. Before that there was no problem with non-concessionary loans. Manageable levels. You are wrong there.

          It all started after wining the war. Infrastructure projects in power generation, Colombo port, tourist destinations, airport linking roads add value and save/bring foreign currency. House, schools, labs, swimming pools, etc. construction does not.

          • 1
            1

            Before the war ended, there were no major projects like the Hambantota port, Matalla Airport, the Mega Stadium, all kinds of highways that cars and buses hardly use. How much does Sri Lanka have to pay back- 5-US billion?

            • 1
              1

              There is no loan on H’tota port now. It was sold off with a $300 million profit and the loan was written off in 2016. This earns foreign currency in bunkering and trans-shipment.

              Mattala airport though not profitable is essential because the stupid country had no backup airport. The only country in the world.

              Highways are used very heavily. Try going in one. Only a little less crowded as normal roads. They are profitable for years now. And the saving in fuel and time is massive. All fuel is imported. Heavily used by tourists who bring forex.

              Colombo port south terminal which is another Chinese loan is earning massive profit and foreign earnings. $$$$$

              Chinese powerplants are working profitably despite sabotage by all politicians in coal tenders. They save billions of dollars in fuel imports (far more expensive than coal) and lost power.

              In wide contrast money spent in the north in building houses, schools, kovils, swimming pools, labs, monuments, internet, etc. earns nothing for the government and absolutely no foreign earnings. And the northern provincial council itself costs over quarter of a billion dollars every year since 2013! Earns nothing in return!

              As the saying goes, the road to hell is paved with good intentions!

              • 0
                0

                No….no, profit, but a 8 billion $ debt became a 7 billion $ debt. And any profits from this failing H’tota port go to China. Now it is the Ratmalana airport for excess air-traffic, so Mattala airport is quite useless. I went on one highway….we were the only ones on the road. Tourists don’t want to go on highways…they want to see the real Sri Lanka in operation with all those butiks, tuk-tuks, and traditional farms round the place. Chinese power-plants are polluting the Lankan atmosphere…..and these were done at times when Climate Change and alternative forms of energy were known.

          • 0
            0

            Hi Gatam,
            “House, schools, labs, swimming pools, etc. construction does not”
            1. No Houses with increased destitute population,
            2. No Schools, flourishing uneducated youth would be a good fertile grounds for future revolt and terrorism.
            Is it not?
            Or is it abundance of fools and uneducated in the country promote unity, amity and peace?

        • 1
          0

          Really you fool

          have you seen how much the new Kelani Bridge helps in allevating the time spent if traffic ?

          Id say white donkey not elephant.

          • 2
            1

            “Really you fool, have you seen how much the new Kelani Bridge helps in allevating the time spent if traffic ?”
            So the superior US moron from California is now a traffic expert? Why not, like me, try driving to Kadawata from Borella, or Seeduwa from Wattala, or even Kirulapona to Kottawa at rush hour and see how much the bridge helps. Its only saving grace is that it isn’t named after a Rajapaksa. But one of those might bite the dust soon, so one can’t be sure Kalyani will stay.

            • 1
              1

              Rajafucksa fools will be wiped out from politics for good very soon.

              The new K-bridge was not built by them. It was built by the Sirisena regime. It took years. Rajafucksa fools opened it.

              Just imagine the congestion if it was not built!

              A good move.

            • 0
              0

              OC,
              “Its only saving grace is that it isn’t named after a Rajapaksa. But one of those might bite the dust soon, so one can’t be sure Kalyani will stay.”
              I agree, the same way Kelanitissa Bridge new bridge opened by SWRDB in 1958, became Bandaranaike memorial Bridge after his assassination in 1959.
              So it is no strange matter!

          • 1
            1

            And on top of that they did not do much to improve public transportation, but encouraged Lankans to waste their hard-earned rupees on cars…..of which they took huge loans to build more roads for.

            • 1
              1

              Except for another massive waste of rebuilding a rail road from Vavuniya to KKS. What’s the use for 96% of Sri Lankans? Nothing! Total waste. And unprofitable too. Not just the tracks but also trains, carriages, signalling, crossings, etc. Total waste.

  • 10
    0

    JR was not only smart but had long years of MP experience in the opposition and neither he nor his wife felt the need to rob and sell the state to build a personal kingdom. He was well aligned with both the west and extreme east by helping Japan which later rewarded Sri Lanka with landmark institutions. His only son’s 3 sons and their families are today considered ordinary citizens and not fake royals. We desperately need honest leaders caring deeply for our helpless citizens and who can selflessly manage and get us out of this critical financial situation.

    • 2
      3

      What? That’s when everybody got jobs as housemaids in the Middle East.

    • 3
      0

      True. JR was very smart. Cannot compare useless GR with smart JR.

      SL was an extremely poor backward nation when JR took over. He turned it into a somewhat decent economy. SL NEVER had debt crisis, forex crisis, trade crisis, etc. during JR’s time despite Tamils bombing planes in 1978 (Ratmalana) and 1986 (Katunayake), economic nerve centres, etc. and JVP bombing transformers, buses, trains, etc.

      GR has no such challenges but is a total failure.

      • 3
        1

        Gatam,

        JR’s time incurred the rise of the insurgencies. When so many of our fellow Lankan were suffering abject hardship and poverty, they were crushed down, trampled upon, and suppressed by terrible torture and death. The separatist war came about for the same reasons. Yes, he did much to modernize the place to be Western orientated. It was the elite who benefited while a few of the masses joined them. The rest went to labor camps of the garment factories and the Middle East. He started the capitalistic movement, but did not have the intellect to install a decent tax structure and appropriate workers’ pay-scale from profits made.

        • 1
          0

          Wrong.

          There was no insurgency during JR’s time. Insurgencies happened in 1971 and 1989 when JR was not in power.

          JVP did create trouble in 1987 and 1988 but JR did not suppress them badly but invited the fools to enter democracy as EPDP did.

          The war did not start in JR’s time!! You have a lot to read. War started in 1972. Read the Sansoni report. Duraiappa was killed in 1975. State banks were bombed in 1970s. Just months after JR became president in 1978 Tamil terrorists bombed an Air Ceylon passenger plane. JR inherited the war.

          Of course JR crushed the 1980 strike as strikers resorted to sabotage.

          JR introduced the open economy which saved SL.

          The only stupid thing JR did was the 13 amendment in his final year in power. By then he was very very old at 82 – over 20 years past the average age of death for his generation. A totally useless white elephant costing billions of dollars every year and created a split SL identity.

          But bringing IPKF to the north was a very wise and strategic decision. IPKF did wonders in the north for SL and paved the way for what happened in 2009. There is a monument in Colombo to celebrate IPKF achievements in SL.

          • 0
            1

            He set the stage for the future insurgencies, the separatist war, and the Eelam party. A fake gloss came over the economy.

            • 1
              0

              Not true.

              JR inherited Tamil war which started in 1972. Sirima did nothing to exterminate these terrorists. JR started it well.

              All other south Asian countries followed JR’s 1977 lead and opened up their economies. So he cannot be wrong.

          • 1
            1

            Gatam,
            “There was no insurgency during JR’s time. Insurgencies happened in 1971 and 1989 when JR was not in power. JVP did create trouble in 1987 and 1988 but JR did not suppress them badly but invited the fools to enter democracy as EPDP did”.
            The 2nd JVP insurgency started in September 1987 –signing of Indo-SL accord.
            JRJ’s term ended in November 1989
            EPDP and Douglas became a paramilitary and joined mainstream Politics, as a result of the Indo-SL accord in 1988 or 1989 with their camp down Fife/Park road, Colombo-5!
            Political Opposition notables, termed “JRJ confining Tamil terrorist NE-SL, inviting, to heart of Colombo!!
            Therefore, to say, “there was no insurgency during JRJ’s term of office”, is incorrect.
            1987-1988 saw daily forced shut downs of business and Government offices and killing of estate superintendents in the southern, Uva, Sabaragamuwa and central provinces.
            I well remember, going to work, dispensing my ‘suit and tie’ for a casual shirt and trouser for 3 or 4 weeks.
            4th week a hand written note, when I returned home, informing, “to desist from that deception” as it is against the spirit of JVP ban (address visited given) and as the final warning!

            • 1
              0

              JR ended his term in December 1988. Not 1989.

              Although JVP started their so called insurgency in 1987 it was well under control under 1988. It became a total menace in 1989 and it was defeated.

              All this because Sirima did not finish off the JVP leadership in 1971. Had she done a complete job, this would not have happened. Not JR’s fault.

              Still EPDP came into the democratic mainstream. LTTE failed and paid the price in 2009. EPDP still survives and holds ministerial posts in all UNP and SLFP governments!! A good example followed by TMVP too. TMVP also outlived the LTTE as a result. In 1989 JVP failed to do.

              JR also removed separatists from parliament. None was bold enough to repeat it. Certainly not Rajapaksa fools.

          • 0
            1

            Gatam,
            Why did they have this monument in Colombo, instead of Jaffna, Batticaloa, Vavuniya, Mannar and Trincomalee which was the heart of the IPKF operations?!
            What relevance in Colombo?

            • 1
              1

              Colombo is the capital city of the nation that also includes the places you mentioned. It has been placed in a place called Independence square appropriately.

              SL army monuments are already aplenty in those areas you mentioned. Why add another for the India army there?

              Tamils, particularly Tamil women still fondly remember IPKF gentlemen in Jaffna.

              • 0
                0

                GATAM,
                How you go about denigrating Tamil women is detesting. You are a scumbag!

  • 1
    0

    Highway network is. not a waste .
    ALL the others are.

    Soma.

    • 2
      1

      Soma,
      “Highway network is. not a waste .
      ALL the others are.”
      I can tell you from personal experience that there was no parking problem in Colombo, even Pettah, before the first highway (Airport) was built. From the first day, traffic jams on the Kandy road . The highways only make it easier for people from Matara or Chilaw to get to Colombo in 2 hours only to spend another 2 hours in a City traffic jam.
      The same thing will happen in Kandy when that highway is finished. There is a good case for limiting inter-city traffic. The money would have been better spent on elevated roads and light rail within Colombo and other cities. But that doesn’t provide enough political credit, does it? Or commissions?

    • 1
      0

      Yes. Highways are not a waste. Even in the north. These are essential.

      However, spending too much on roads and highways is a waste.

      Highways allocation is higher than health and education in next year’s budget!! Total waste and utterly stupid!

      It is called corruption.

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