29 November, 2022


Yahapālana Government As A Hyper-Debt Regime

By Milton Rajaratne

Professor Milton Rajaratne

Government debt, as an important topic, was highly exploited by the Yahapalana coalition to come to power in 2015 and to remain in power during the past three years. The coalition government describes ‘Rajapaksa Regime’ as debt driven and has caused an immense debt burden on the country and its people. The Rajapaksa rule ended on 9th January 2015 and by that time (end of 2014) the total government debt stood at Rs.mn. 7,390,899. The domestic and foreign debt components remained at Rs.mn. 4,277,783 and Rs.mn. 3,113,116 respectively. As a result the debt burden of the country, as a percentage to GDP, stood at 71.3%. The per capita debt burden had reached Rs. 357,000 while the gap between per capita income and per capita debt remained as Rs. 142,000. While criticizing borrowings of the previous government, the present government has borrowed surprising amounts. This encouraged the writer to compare between the Rajapaksa and Sirisena debt regimes and to inquire into the government debt scenario analyzing its economic perspectives.

Table-1 indicates that the government debt burden remained at 71.3% at the time of Rajapaksa’s defeat. New policy measures that were introduced to overcome debt burden with effect from early 2015 have continued for good three years so far. In spite of debt curtailing alleged by the new government, the debt burden has rapidly increased from 71.3 to 79.3 within two years and it can be estimated, based on government debt statistics reported by the Central Bank for eight months until August 2017, that this figure would reach 90.0 by the end of 2017. This indicates that the debt volume prevailed by the end of 2014 would grow by an amount of Rs.mn. 4,000,000 making the total debt as Rs.mn. 11,000,000 by the end of 2017. This is a growth of almost 50% since 2014 or all time total government debt.

During the same three year period, per capita income has increased by Rs. 72,000 while per capita government debt has increased by Rs. 154,000. This reveals that as the economic growth has been much slower than the growth in borrowing. In consequence, the government debt has outgrown the per capita income at a rate of more than 200%. Therefore the gap between per capita income and per capita government debt has narrowed significantly from Rs. 142,000 to Rs. 60,000 as indicated in the Figure-2. This explains that there is a debt component of 90% in per capita income at present compared to 72% in 2014. The slow growth of per capita income is connected to economic slowdown from 6% to less than 4% between in 2014 and 2017 due to incapacity of the present economic policies. Increase in debt while decrease in economic growth eventually leads to a debt trap.

The foreign debt has grown faster than that of the domestic debt between 2014 and 2017 which is much significant in 2017. While domestic debt has increased from Rs.mn. 4,277,783 to Rs.mn. 6,000,000 which is a growth of 40% foreign debt has grown from Rs.mn. 3,113,116 to Rs.mn. 5,000,000 or 60% which is an alarming growth. This is due to new debt as well as debt adjustments to depreciating exchange rate of the Rupee. Sri Lankan rupee has depreciated from Rs. 130 per US$ to Rs. 155 per US$ by 18% during the past three year period due to poor exchange rate management and unfavorable trade balance. The increase in foreign debt component has not only intensified the debt burden but has heavily increased external dependency also. The situation has been aggravated by trade gap which in turn requires further foreign borrowing to settle it.    

Government has rejuvenated its tax policy at every budget since 2015 to collect more revenue to finance government expenditure and repay debt. Government revenue stood at Rs.mn. 1,050,362 for 2014 and it rapidly increased up to Rs.mn. 1,463,683 in 2016 in response to new tax policy. Government revenue is expected to increase almost up to 1,750,000 by the end of 2017. This translates into per capita tax payment as everyone paying roughly Rs. 81,000 in 2017 compared to Rs. 50,000 in 2014. The tax burden has increased by Rs. 31,000 or 62% from 2014 which in turn has significantly pushed the commodity prices and cost of production upward. High taxes have adversely affected domestic consumption and production on the other hand. This, among other reasons, eventually has led to economic slowdown throughout the past three years indicating policy failure of the coalition government.

This brief analysis compares government debt, its composition, trend, and ratios between two administrations since 2014 and 2017. The findings primarily nullify the claim of the coalition government that Rajapaksa rule has overloaded the country with debt. And thus it should be understood that that claim is only as a political propaganda of the coalition government. Statistics prove that if Rajapaksa government were a debt regime, the coalition government is a hyper-debt regime. The policies of the coalition government implemented during the past three years have resulted in mega debt causing bankruptcy danger, narrowed per capita debt-income gap, increased foreign debt dependency, heavy exploitation of people through tax, lack of investments in economic services, spending borrowings for consumption, and collapse in economic growth. These are only a few symptoms; the ailment is more complicated and serious.

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Latest comments

  • 14

    So much so for the Yahapalana government. According to their claims they should have reduced the debt burden when Mahinda’s exuberant expenses were reduced after his fall.

    • 2

      Mahinda, Basil, Gota the three rocketeers +++++++ undisclosed debt + interest on loans have burdened the country without even a flash of light at the ‘debt tunnel’, nowhere near. Aba Saranai!

      • 14


        If there are undisclosed debts why should we pay them? We don’t have to worry about them right?

      • 1

        Anonymous: Talk something you know. It is not Rajapskes, Even Ranil and the gang, CBK and the gang and whole 225 are the same. JVP also believes that everything should be done by the govt when even China doe snot believe that. china did not develop by communist theory alone.
        It is not rocketeers. It is Rackteers.
        IF the govt blame Mahinda Rajapske govt alone for not having proper accounting practices, that is again the fault of the govt. HAve good practices and one accounting method whether the govt changes or not. when they change and if that leads to corruptions, then prosecute them.
        What Ranil saying MR was hiding loans means, none of them have one accounting practice. they change it from time to time.

    • 2


      What does these pictures tell us about this island?
      Was the treasury sitting on bills it was supposed to pay or account for before the end of 2014 and differed them to the years ended 2015, 2016, 2017, …… staggering all previous loans to 2015 and beyond? Who is doing the creative accounting within the treasury/ central bank?

      Does it mean Basil (10, 20, 30%) has already the entire island to Chinese and need another loan to settle the difference? Does the total debt include all the commission paid to the clan and cronies? Does that debt also include Hindian war loans of approximately 2 billions? Or was it a large scale grant to this island?

      • 6

        Native Veddha,

        No you are wrong. Ranil and his clan explicitly told us during the presidential campaign that once Mahinda is gone the exuberant costs would go down and they can pay off the debts using that money. Moreover, if UNP had burrowed money from some other source to repay the so called Mahinda’s debts then we should see the debt level goes down atleast somewhat. Where have that happened? What debts have been repayed by the Yahapalanaya?

      • 4

        NV, It is called “printing money” mate, may be you should talk to your neighbor’s kids, sounds like you can learn a lot from them. Having said that, Cheers mate, take it easy, don’t worry your pretty head about all these numbers.

    • 3


      Any chance you could give these growth graphs from 2005, instead of from just 2013 so that any demarcations in trend is clear to substantiate your points about the Yahapalana.

      Also, the Debt-to-year end are not incremental annual levels, but rather the accumulated debt. Correct? So could you also detail the annual debt-repayment commitments on debt accumulated prior to Yahapalana, but which are being paid during Yahapalana. That could also be a critical, possibly rising portion of the annual gap serviced by increased borrowing in the recent years.

  • 2

    All this from previous government and its agents.
    They robbed the country and looted public money.
    This government should have taken action but did not do it ..
    Now they repeat the same mistake.
    Now only JVP could do some thing good .
    It is only party that could save the country .
    They are young but matured enough to run the country..
    They are educated and honest people ..
    Vote JVP to free the country from the corrupt people

  • 2

    Professor Milton Rajaratne,

    How confident are you that these figures are accurate? ………..There was a period where the analysts in the CB were coerced/forced to cook the books/figures.

    Have you taken into account all the funds borrowed by the previous government form the private sector, especially from the large government owned/run state banks (BoC, NSB, People’s B etc) ……..which were largely hidden?

    Pardon me for being so cynical; it’s hard to trust anyone these days …………Lankans have a way of doing that to you ……….. Sarah Huckabee Sanders has a long way to go to catch up to the Lankans of both sides/parties ………perhaps, we should utilize our true expertise/forte and establish a graduate program in the field of propaganda.

  • 2

    What nonsense. No body will reduce the debt burden because they know that the Sinhala fools will vote for them, come what may.

  • 5

    Pareto Principle: Thank you Prof Rajaratne, for this very illuminating exposure. A report from the global charity Oxfam issued yesterday in Davos shows that the world’s richest 1% own 82% of the wealth. Putting it in another way, just 42 people own the same amount of wealth as the poorest 50% percent worldwide. As the CEO of Oxfam GB, Mark Goldring, says this indicates that something is very wrong with the global economy.

    We were familiar with a principle known as the 80/20 rule according to which, 80% of the wealth of a country is owned by 20% of the people, which was considered as unacceptable. But the recent data makes the 80/20 rule pale in comparison.

    The article does not specify what the ratio is in Sri Lanka but states that the income gap has increased. What makes all this more unacceptable is that most of the rich have become rich not through legitimate means but by robbing the masses. Robbing here does not mean only acts such as the CB scam but also taking bribes, influence peddling, tax evasion etc. Tax evasion by rich people affects the ordinary citizens twice. First he has to pay a higher tax because the culprits pay less or nothing and secondly the government has to cover up the balance by taking loans, which finally has to be paid by the ordinary citizens.

    I suggest the following as remedies. (1) Make declaration of wealth a must. (2) Confiscate the assets that are not declared or wrongfully declared. (3) Reward genuine informers. Anyway, I don’t think any such measures will be taken because the worst culprits are those who should take action.

  • 4

    What is this man writing. There is no problem in borrowing as long as;

    1. There is targeted growth rate to service loans
    2. The interest rate for the debt is acceptable

    In both these counts the present government is doing well. We expect a rapid growth as we have major economic projects taking off from end of this year. Unlike Mahinda government we are not borrowing at 6%-6.5% for infrastructure projects when such projects cannot bring more than 4% (at best) return. Commenting only about the level debt borrowing is only pulling wool over the eyes of gullible citizens.

  • 0

    This comment was removed by a moderator because it didn’t abide by our Comment policy.For more detail see our Comment policy https://www.colombotelegraph.com/index.php/comments-policy-2/

  • 2

    I had to edit a lot to stay within the 300 word limit.

    I do feel that the country is on the right track and I will explain why below.

    Central bank bond yields have seen a steady decline over the past year. A 5 year bond went from having a yield of approx 13% in Feb 2017 and 9.5% as of today. It will take some time for that benefit to fully affect domestic lending rates but the lending rates have started falling over the last few months.

    The government just signed the first of many comprehensive FTA’s that are on their way today. This will make our businesses have to become more competitive but it will also open up larger markets for our businesses to be able to target. This will provide great benefits to consumers in terms of prices as well.

    The budget 2018 was also a step in the right direction. The governments revenue will exceed recurrent expenditure (Includes interest on debt, salaries, building maintenance, etc) for the first time in decades. We will only borrow for the purpose of public investment and rolling over of maturing liabilities..

    Then we also are seeing an upward trend in exports and tourism. The increase in exports can be attributed to regaining of GSP+ and this was due to the governments foreign policy success.

    We are also seeing a balance of payment surplus as per the following article. http://www.sundayobserver.lk/2017/12/31/business/balance-payments-records-us2b-surplus

    All this states that the economy is on the right track and it will just take some time for the the average joe to feel the benefits. Let us be patient until 2020 before we decide to lose faith in the government or not.

  • 0

    Living-in-debt is the way the world economic system has evolved. Money lending and debt servicing has become the main industries.
    Some countries are careful to take debt servicing into account and prosper. Some get drawn into a vortex of debt. We are one of them. In our case the fuel that propels the vortex is ‘corruption’.

  • 2

    Those who comment are eager to devide politicians group wise. whether it is SLFP or UNP are interchangeable. they change parties when the govt changes.No one accepts that reality and talk. PRevious govt was also stealing. That is for sure. Mahinda Rajapakse was building things so that his children could own those. Only problem is this govt did not expose those instead, Ranil tried to steal on his own and fail.
    IT is true, since 2013 sri lankan economy was doing well. Most of the job creation is because of the disappearance of the war and is from service sector. the other sector is uncontrolled hiring into the govt whether the institution need workers or not. they also increase salaries as a political promise and not because of the demand for certain skill need salary increases.
    RAVI THE LIAR also has handed money Transfer service via Credit cards etc., from all the banks and customs to a Private business. that can lead to many corruptions such as some bringing items without declaring properly and selling information to overseas. the owners name is One Muhunthan Carnegy. It is very easy these things go to LTTE like hostile forces. Ranil does not have any idea. Even if Mahinda Rajapakse comes (he should not come any more) they all will be the same.
    It is true, If the middle east begins austerity, Many women have to come back and Sri lanka will be in trouble.
    Recently govt through increased their limit to borrow. they also brought legislation relating to that. I think that is to increase the debt limit more.
    Sri lanka is an importing country. Production is going down, Yet, the govt is increasing the debt limits. Sri lanka’s employment is mostly by the govt. there is no retraining. so many graduates and educated are unemployed. but the govt bring more professionals from outside. there are no sceendary education institutions to train people for required employment sectors.

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