7 December, 2023


The Foreign Debt Crisis Of The ‘Yahapalana’ Government

By MahindaRajapaksa

Mahinda Rajapaksa

Mahinda Rajapaksa

In announcing increases in the VAT and income taxes, and the reintroduction of the capital gains tax the Prime Minister said in his special statement to parliament last week that the government has been compelled to increase taxes in this manner because my government had got the country into a debt trap. The country is now facing an unprecedented economic crisis and we should examine how and why things came to such a pass.

After coming into power, the present government obtained 400 million USD under a currency swap arrangement with India in March 2015. They obtained another 650 million USD through a sovereign bond issue in May 2015. Another 1,100 million USD was obtained from India in July under a currency swap agreement. A further 1,500 million USD was obtained through a sovereign bond issue in October. Between March 2015 and March 2016, the government issued short and medium term Sri Lanka development bonds on 12 different occasions borrowing over 2,711 million USD. Thus in the 15 months they have been in power, the present government has obtained 6,361 million USD in foreign loans.

To put matters into perspective, this is enough to meet the entire foreign loan components of the Mattala airport (190 million USD) the Hambantota Port (426 million USD) Norochcholai Coal Power plant (1,340 million USD), The Colombo-Matara Highway (630 million USD), The Colombo-Katunayake Highway (248 million USD) all put together, and there would still be enough money to build not one, but two Port Cities (1,400 million USD each) one 500 megawatt Sampur Coal power plant (500 million USD) and yet another Mattala airport with the final leftovers.

This government enjoyed foreign exchange savings of around USD 2,500 million in 2015 due to the precipitous drop in oil prices after they came into power. But they could not build up foreign exchange reserves or even make the Petrolem Corporation and the Electricity Board profitable. All these colossal borrowings including the massive savings from petroleum imports have been spent on consumption. It is because of the almost comic fiscal irresponsibility shown by the government that Sri Lanka’s credit rating was downgraded by Fitch and Standard and Poor’s recently.

Explaining their reasons for downgrading Sri Lanka Fitch ratings pointed out that the government had loan repayments amounting to 4,000 million USD this year which would place an immense strain on foreign reserves. Of this four billion, more than 2,497 million USD or over 62% of the total were loans that the present government had taken in just the past year. The 1.1 billion USD currency swap arrangement with India entered into in July 2015 for six months and taken in September fell due this year. Furthermore, of the Sri Lanka Development Bonds issued since March 2015, over 1,397 billion USD were short term bonds coming due this year. The share of the repayments due in 2016 attributed to all previous governments put together was thus just over 1,500 million USD. Fitch would not have downgraded us if the debt repayments had remained at a more manageable level as was the case when the economy was managed by my government.

This downgrade has led to a situation where it has become very difficult for Sri Lanka to borrow in the financial markets and they have been forced to rely on multilateral lenders like the IMF who impose conditions such as increasing government revenue to demonstrate that the borrower will be able to pay back the money lent. This is why taxes are to be increased. Last Friday the government had to repay the 1,100 million USD borrowed from India. This month, the government was so desperate for money that they issued Sri Lanka Development Bonds with three and five month maturity periods to raise money. Development Bonds are supposed to be long term instruments. But this government has been using them to raise short term funds. Usually any country would phase out the loans they take so that there is no ‘bunching’ of loan repayments. This government has been ignoring even those basics. Such things do not go unnoticed in international credit markets.

The last time Mr. Ranil Wickremesinghe was Prime Minister between 2001 – 2004, the government debt to GDP ratio was consistently above 102%. It is my government that brought this ratio down year after year until it reached 75.5% by the end of 2014. This was the lowest debt to GDP ratio achieved since 1979. During the war years from 2006 to 2009, government expenditure remained at around 23% of GDP but after the war, we controlled expenditure until it reached 18.3% in 2014 – the lowest govt. expenditure to GDP ratio since independence.

It is because of this demonstrated fiscal dicipline that the IMF gave my government a stand-by facility of 2.6 billion USD during the global economic crisis of 2009 without any of the strict conditions that they have imposed on the present government. My government did borrow money to build infrastructure projects, but these were long term concessional loans at 2% or less in interest. Furthermore such borrowings were spread out over many years. We never borrowed for consumption like the present government which is why there were no fiscal fiascos like sweeping revisions of budget proposals and constant revision of tax rates when my government was in power.

The prime Minister’s allegation that there are undisclosed loans and liabilities of my government which are only now coming to light, is also a complete falsehood. State owned enterprises engage in commercial activities and they have their own dealings with banks. Borrowings by state entities are governed by their respective acts of parliament and have to be approved by cabinet. Such borrowings are paid back from their own revenues. Some loans may be guaranteed by the Treasury and in such event are reported to Parliament.

The Prime Minister said during his special statement to parliament last week that he increased the salaries and pensions of public servants, and reduced the prices of fuel, gas, sugar, canned fish etc. He was claiming to have fulfilled all the irresponsible promises made during the Presidential election to win votes. The present precarious situation shows that there are serious consequences to contend with when you try to win votes by pledging the taxpayer as live collateral.

Even before the present debt crisis, the economy was in an uncontrolled freefall. The All Share Price Index has lost around 1500 points after 8 January 2015 and over Rs 600 billion has been wiped off the market capitalisation in the stock market. Foreign holdings of Sri Lanka rupee bonds have gone down by more than half during the same period. Foreign investors who kept renewing their investments when I was in power started exiting the Sri Lankan bond market after January 2015 because they have no faith in the economic management of the present government. During the first nine months of 2015, the unemployment rate increased by nearly 1%. The Rupee has depreciated more than 10%. Foreign reserves which at an all time high of 8,200 million USD at the end of 2014 have gone down to less than 5,000 million. In the coming months, all that can be reasonably expected are more tax increases, more cuts in welfare measures and increases in water, electricity, telecommunications and transport costs not to mention even more unemployment due to the continuing economic mismanagement of this government. The present government will have to be held accountable for the hardships the people will have to face.

*Text of a speech delivered by former President MahindaRajapaksa on the “Foreign debt crisis of the yahapalana government” at the Battaramulla office on Monday 14 March 2016.

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Latest comments

  • 19

    Yahapalana PM batalanda Ranil has borrowed USD 6.365 Billion in 15 months.

    If you extrapolate that, wonder what the figure would be in 60 months?..

    Did the Galleon Fund liquidator and our Yahapalana Treasurer, park that residual USD 3 Million in the CB for Singapore Mahendran to help the Balance of Trade problem .

    Or, did he give it to Aloysious to invest in Yahapalana Bonds at 6.72 % which is more than 600 % our Diasporians get for their USD accounts in the States..

  • 18

    I doubt whether the Yahapalana suckers here have done even Year Ten Economics, let alone understand Macro Economics, International Trade, Investment, Finance, Bond Trading etc.

    • 13

      KASmaalam KA Sumanasekera

      “I doubt whether the Yahapalana suckers here have done even Year Ten Economics,”

      Have you?

      If you have please explain what you understand by Macro Economics, International Trade, Investment, Finance, Bond Trading etc.

      Please educate us in economics discipline.

      You can start with, utility, scarcity, demand and supply, Elasticity of Demand, Cost-Benefit Analysis, Opportunity Cost, Technology, Business Cycles, Aggregate Demand Aggregate Supply and Employment, Balance of Trade and Balance of Payments, Financial Markets, ………… Institutions, Transaction costs, Human Capital, …………..
      law of diminishing returns
      Vicious circle
      Virtuous circle
      Value addition
      Cobweb theorem

      Market Failure and Poverty Traps

      Amrtya Sen poverty and asset endowment

      Mahalanobis Growth Model

      Free Riders and rent seekers

      Economics of corruption

      Finally Prisoners Dilemma.

      I am just dropping names.

      • 9

        Dear Native..

        Relax mate…

        We know you are the Wizard of Yahapalana Economics.

        How about adding , Inflation, Deflation , and Depreciation of the LKR.

        Bond Trading Yahapana style, Inflated Interest Rates. Margins Foreign Exchange and Stock Market manipulation. Insider Trading and Galleon Investment Funds and Money Laundering ..

        Or should I say Dry Cleaning ?….

      • 5

        Heh he… Kasmalam lost and not found!!!

        • 4

          Rohan I hope your wish will come through soon. So we don’t have to read this idiot KASMALAM’s stupid comments everyday. I wonder what machine produced this fool.

      • 6

        just tell us, if the Yahapalana clan has obtain 6+ Billions of USD as loans for the past 15 months? That’s all i’m interested in knowing. Because I DID NOT KNOW, YAHAPALANA F**KERS were doing the same game in a different name !!!


        • 4


          You should contact Central bank and Treasury for details.

          Not much is published on media, some of the figures are not only contradictory but also irreconcilable.

          I have given it up trailing the figures.

          • 2

            Dear Native.

            Send a fb message to Aloysious….

            • 3

              KASmaalam KA Sumanasekera

              Why don’t you get the information and post it here in this forum?

  • 16

    Sumanasekera is voicing the sentiments of horapalanaya horapakshaya

  • 9

    It is not about who wrote it, it’s about the facts that are stubborn which doesn’t digest many in this forum. Ranil too was reading a written script in Parliament, defenitely prepared by someone else. That’s how it works and whoever prepared it for MR, he had done a terrific job, since its clear even to a grade eight student.

  • 10

    PBJ and Cabrall were the architects of the economy under MR. They knew what they were doing. RW and his advisers do not know what they are doing. Super gain tax, 60,000 annual fee on small private companies are all some of the reflections of bad economic management. Under MR only problems were international relations and communal harmony. True, to understand the utter mismanagement of the economy by this government you don’t need a Phd. Even a grade 8 student will understand the calamity. Where is Harsha? Where is Eran? Where is Amunugama?

    • 5

      PBJ and Cabraal were not on talking terms, nor were they sitting and “designing” the economy – that was handled by the hundreds of qualified personnel in the Treasury and Central bank who remain there TO THIS DAY. Your reading of the matter shows the reason why Rajapaksa still has popularity – people believing everything they read.

      • 3


        If hundreds of qualified personnel still work at CB and treasury to advise why this government is making blunders after blunders in economic management?

  • 11

    The whole country should know that there is a bunch of crooked “intellectuals” who are working as a group to bring Rajapakse to power. Not because they love him but because they need to save their own crooked necks. They built fortunes with Rajapakse support, so much so that they are desperate to escape prosecution which is slowly but surely coming to them. One of the crooked group definitely wrote the article. Damn shame that learned people should have acted like this and now want their crooked past covered up by a crook! They may be learned but they cannot be intellectuals!

  • 5

    Good to se srilanka destroyed by Christian… Mahinda show power of sinhala Buddhist..now time come for seperat.. Same like kandian did in early…India will manage Muslim and christian.. Good Luke Colombo

  • 7

    Where do the $18 Billion transferred abroad by the “author” of this article, figure in his calculations?
    Did his mouthpiece who wrote this for him even think about it?

    • 7

      Lol so he has US$ 18 billion??? That would make him the 50th richest man in the world and the 2nd richest man in his beloved China.. Yet he chooses to live in a country of fools who blame him for everything from the weather to the loss of cricket matches.. Good one!!

  • 9

    Dear Mr. Rajapakse,

    Whilst congratulating you on your audacity to publish your article on CT,I honestly don’t know what you are grumbling about this government. They may not be meeting all our expectations but at least we the public can live without fear of being attacked for non – compliance of yours and your brothers warped ideologies. Just for starters you and many of the public can freely express themselves in this column which incidentally you banned for years. I remember the time we had to use proxy servers to accesses CT whilst your secret police was trying catch us

  • 7

    The Old Royal family members were run by the bad influenced supporters of the team is an accusation put forward by many opinionist:s. Their puny brains were easily manipulated, guided to take dangerous paths by the bad influences. Without understanding the nature of the act they were taking forward, they have been doing things. The Old King reading out this article at his office, Battaramulla(Paththarmoolai) is a prime example of their nature Yahapalanaya Prime Minister’s promise not to sue them for their crimes is protecting them even from the FCID. So with the hope of his fiscal mismanagement of the country would not come out, the cunning old king is reading a report, which meaning, as usual he doesn’t know. It is unlikely any on the Yahapalanaya Government members want to bring out the fraud took place in the old Royals time, unlike the way CB Governor Mahendran’s frauds came out (it may be because he is a Tamil). It was quick and had real effect on Yahapalanaya Government’s trustworthiness on financial dealings. The Yahapalanaya government is unwilling to put out anything of the Old Royals as one of the reason is many of them were in that, so they do not want show off the dirt on their teeth themselves. But, if there are any chances, they will repeat those now too. Of cause that is for what they have gathered in the New Royal Government too.

    Nuraicholai, Port City, Airport Harbor….. all those financial mismanagement were done by tightening the common people basic consumption. There is difference between the developed country Greece belt tightening and the North-East’s poor widows and peasants tightening their belts. When these unwanted white elephant projects were going on with loans that are fallen and about to fall due, the revenged two provinces, North and East, one time rich and self-sufficient provinces were bankrupted. The widows and peasants were forcefully turned into beggars. Now it is the NGOs and diaspora taking the burden if they are cared of anything.

    The writer is hiding Old King’s frauds under management efficiency, thinking only the Modayas are ones going to read this on CT and he brought it to public and read it. There itself his faulty management skills are pouring out; this type of essays are for learned, not for Modayas. They targeted one and wrote to another one. He, consulting with the horoscope readers, conducted the election two years before the term’s end, not because of his self-confidence of running the Government for two more years, but the fear helplessness. Everybody does know the reason why he ran out of the government. He thought if he ran the government for another two years, the SLFP that would sink in that election to state never would it be able submerges to surface again. Further, he consults horoscope readers not because of his management skills, but because he always needed another crook say “Tathastu”(so be it) for his crimes.

    As a born crook, this man is a master in doing things off the books. He maintained files on his ministers, officials, his own family and private citizens, only for the purpose to black mailing them. Management books are not describing this as art or science of management. But legal books in West (not applicable under Lankan legal system) contend this as punishable crime with penalty and prison. He conducts his parliament outside of parliament, in temples. He read out replies written by writers for MPS’ and PM’s parliamentary speeches in Battaramulla (Paththarmoolai) office. It is not he does not know to manage a government. He does not know to manage the opposition too. When Fonseka started to speak in the parliament, without listening and answering to that speech, he got up and walked out of Parliament. Later, he replied from outside that the media may bring back Thalaivar Pirapakaran soon. This is not the way to manage an opposition party. There are no questions about the existence of hidden loans and there are no professional explanations why there are there. A systematically run government will always have on the fingertips of the health of its cooperation. After the flood had gone over the nose, it is not going to open its hands and say “I swear I never did know what they were borrowing”. Old Royals was the most and worst government who interfered into the operations of Government Corporations. COPE investigation of Dew Gunasekara had blown its whistle on this matter. It was high time for Old Royal put a CCTV on their corporations. Now saying “if the corporations borrow, they will pay back” is certainly a talk of “Appa not hiding under the haystack”.

    Credit rating down grade does happen because of this year operations. This is unlikely to happen even to a private citizen. This does not happen at all to governments. The Old King’s report writer opportunistically grabs some statistics and fooling the Modayas. This is similar to another racist tactics used, the “superior Sinhala Buddhists”. It is his past few years’ mistakes are the ones reflected in that down grading. This is not to honor the supper smarts Sinhala Intellectuals in the New Royal Government, after it is exact “color photo copier’s” copy of the old Royal Government. But the current financial crisis are result of the past governments thefts, frauds and white elephant projects.
    Further the inflow or outflow to investment on monetary instruments by foreigners do not reflect the long term economic health of the country. Those investors normally look out for easy, short-term profits. It reflects mostly the current turmoil (up or down). Further the 2.6 billion stand-by facility was not given to Lanka as the way the Old King’s fraudulent writer describes; or he might have forgotten about it. IMF and other IC organizations, that time, were willing to help Lankawe to get out of the refugee problems. Still the loan was rejected at first by IMF, as the old King was very unreliable and Chinese communism bent. India got involved and threatened that it will release a similar loan unless IMF gave it. The loan was given only to sideline India and to bring full grip directly on Lankawe. We saw that kind of India’s mistake allowed Lankawe full side with China and it has now forced it to go to West. The writers attempt to hide all the political elements played a role in that loan and trying to show it as the faith on the crook Old King is the writer’s comedy.
    There was no practical investments took place in the Old Royals’ government. The only useful thing was Nuraicholai and it was the worst government corporation management in Wildlife Sanctuary Lankawe’s history; even above Sirimavo’s MPCS and CWE management in the 1970s. Tea and rubber exports suffered the worst. When tea couldn’t be sold to Iran for oil because of Americas blocked, the estate workers became beggars. Textile export and Fisheries suffered by the EU’s blockades. Factory after garment factory closed in the south and many young Sinhala girls depending on them for their life went back home and started to stare the sky. In addition to the Tamil refugees, record amount women from East, South and North left as salve workers to Middle East. In addition to China’s bullying and computer hacking, Middle Eastern governments funded to corrupt Lankawe’s education system and permanent undesirable cultural changes. The effect of these is yet to show off in the public streets.

    Yahapalanaya government does its operations in covert and hidden manner. It is very insincere in turning around the past down falls. The only promise it gave out have been so far kept is the election promise of “Not to investigate any leader, any commander and even any private soldiers”. This is sharply debilitating the investigation of financial frauds and crime fighting. As the Genocide Crime and the other two crimes were done by the same party and intertwined it is unlikely the Yahapalanaya Government would be willing to answer Old King’s accusations. In the process of saving the Old Royal’s radical-racial criminal, Yahapalanaya government is willingly accepting the Old Royals faults on their head, not fighting back. The solution for to bring out the Yahapalanaya government out of the cocoon it has built around, and turning around the Lanakwe’s economic problems, as diaspora has been claiming from all way of 2009 to until now, is to ICC investigate the war/genocide crimes. That is the only way. Period.

    • 4

      What a long thesis = dribble to come to the conclusion that there should be a war crimes investigation on the Rajapaksas only! So the Tamils killed by that murderous, over fed pig called Prabakaran did not kill any of your relatives? or He did but you do not care!!!
      Mahinda Rajapaksa has eloquently pointed out the state the economy in Sri Lanka today. And most cannot digest this! And I am sure he had no problem writing this as he had no problem handling the most dangerous terrorist and his supporters in the west, as well as winning the war! He had no problem keeping and maintaining the Sri Lankan economy growing and with high rating / grading!
      Do not pretend to shed tears for the state of Sri Lankan economy today. Racist Ponnaya like you robbed Sri Lanka /I am reffering to Arjuna Mahendren. So go and cheer behind the backs of these ‘Yahapalanayas’!

    • 0

      Please put a like who read above comment LOL

  • 4

    EU Commissioner for Development is coming over for 3 days to give Batalnda PM, 53 Million Euro Dollars…

    Why the hell Ranil had to rush and borrow 6,536 Billion .

    And tax the Yahapalana suckers extra 4 % on Red Label. Honey cured Bacon, Kraft Cheese and Indian NesCafe , both Decaff and 43 Bean…

    And force them to pound the pavements in a Protest march in Union Place, to convince the inhabitants that Ranil is doing all this to give one Million assembly jobs for Dalits.

    Poor things , They haven’t done this sort of protests for twenty years.

    The must have had a crash course on how to chant those UNP slogans in unison with Sajith.

  • 8

    KASmaalam KA Sumanasekera

    “Why the hell Ranil had to rush and borrow 6,536 Billion .”

    You should know why.

    On the morning of 9th January 2015, they found an empty coffer in the treasury. It has been pillaged in the previous 10 years.

  • 10

    [Edited out] Most of the foreign debt was created by you. 20% of that went into your pocket. Return that money you greedy [Edited out]. It is sickening to see your disgusting face droving away at the fools who live there. We have a resident idiot by the name KA Sumanasekera, who is a complete dimwit crowing away for you even after you stopped feeding this low class bugger the breadcrumbs which fell off your table. Why don’t you do us all a massive favour,[Edited out]

    • 0

      Dear Tamil from the North, You are wasting your time and energy trying to educate morons of the calibre of K A Sumanasekera. Fortunately, Rajapakse sycophants like him are a dying breed as shown by the recent rally by Mahinda Rajapakse reportedly so poorly attended that one eagle-eyed reader discovered that the crowd had been photoshopped.

  • 3

    Batalanda Ranil and his mates borrowed money to help the Yahapalana investors get a decent return for their idling Dollars.

    Which wouldn’t earn even one percent in Foriegn Banks.

    It was the pay back for the seed capital they put in to give Yahapalana powers to Maithripala.

    At 6.85% for USD Dollars and 12.895 % for LKR these are what you call gold class returns for their money.

    If you average the two interest rates it is 10 % return for 6.536 Billion Dollars for up to 30 years.

    I do’t think even Galleon Ravi’s Buddy TRO Rajaratnam made this sort of dosh even with insider knowledge…

    Even if the Diaspora doesn’t get their Eelaam Homeland with all the bells and whistles, they will be still laughing all the way to the bank.

    I am glad our Dalits dont pay Income Tax . Neither they do get Capital gains.

  • 3

    what ever said and done, what has been highlighted by MR are impartant facts to consider. Thouh MR and family were corrupt, if what he says is true we are in a real mess. RW did not have experience in running an economy and he is inflexible and arrogant. He thinks he knows every thing.

    RW and Yahapalanaya clan has a duty to explain to the citizen about MRs allegations. In one year if RW can consume so much, we need to consider bringing back MR without the family.

  • 2

    An impending ongoing Economic Catastrophe since 2015 January 9th on that political situation by last 16 months which UNP led ruling coalition power has totally lost of control of National economy by its mismanagement unaddressed the growth of capital and labour in Sri lanka.

    Without political-economic vision of UNP-Ranil W… CBK and Poor- MS is unable delivered good result of Nation growth of GDP by depend on counter -revolutionaries politics back by US and Indian line of policies.

    After end war 2009 May MR back policies of growth has been abandoned by since UNP regime power 2015 January 9th gain by UNP-leadership nearing ruin economy with increasing speed.

    UNP leadership absolutely has done nothing actually to avert economic catastrophe, well all their steps now waiting and is causing increasing dislocation of every sphere of national life of Sri Lankan.

    The short-sight policies has not take thought of attention and will not suffice to satisfy all walks of classes of that combating catastrophe by the UNP Ranil. W… MS and CBK coalition politics initiated by US and Indian hegemonies.

    Ranil W… policies are quite clear ,that all economic measures are not being adopted NOT in favour of our nation because, exclusively that because of US and Indian companies realisation would affect the fabulous profits of handful of US and Indian business magnets ,their companies and foreign capitalist.

  • 2

    From day one , the Govt. went on spending spree, paying salaries and perks for 100 ministers, deputy ministers, commissions, several committees and sub committees and its not proper to blame the past Govt.,for the debts carried forward, although they plundered the treasury in style during their time. There is a proverb ‘cut your coat according to the cloth’ and did not the Govt. know that they were burdened with heavy debts, local & foreign, when they took over the Govt. and why they did not plan on austerity drive on cutting down the Govt. expenditure to bare minimum .Why did they undertake so much of foreign travel under the circumstances. Why the people were not told about the actual financial position of the country when they took over the administration. For example, they got a commission to study on Sri Lankan airlines, the dollar guzzling enterprise of the SL Govt,in good faith, paying around 3 million rupees but the report is collecting dust at the Chairman’s office and the airline continues its operations,
    unabated , losing heavily on a daily basis, that too in US Dollars. Prez/PM did not come forward to downsize or close this monster.

    Now they will be forced to hit the poor people, below the belt with
    austerity drives or in increased taxes ,as they have no other alternatives and the distance between the poor and the rich will widen.

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