Never ending Debt cycle in Srilanka
Debt in Sri Lanka refers to the amount of money that the Sri Lankan government and other entities owe to domestic and foreign lenders. Sri Lanka has been facing significant challenges in managing its debt levels in recent years. The country’s public debt has been steadily increasing.
The main contributors to Sri Lanka’s debt are:
1. Borrowing from international markets: Sri Lanka has raised a significant portion of its debt by issuing bonds in international markets. These bonds are purchased by foreign investors and institutions, and the government is required to repay the principal amount along with interest.
2. Loans from bilateral and multilateral lenders: Sri Lanka has borrowed from bilateral sources, such as other governments, and multilateral institutions like the World Bank, Asian Development Bank (ADB), and International Monetary Fund (IMF). These loans often come with conditions such as policy reforms and economic adjustments.
3. Domestic borrowing: The Sri Lankan government also borrows domestically through the sale of government bonds to individuals, banks, and institutional investors within the country. Domestic borrowing is a way to finance budget deficits and meet government expenditure.
4. Infrastructure projects: Sri Lanka has invested heavily in infrastructure development, including the construction of roads, ports, airports, and power plants. These projects require significant funding, and the government often relies on borrowing to finance them.
5. Social welfare programs: The government has implemented various social welfare programs, such as subsidies for essential commodities, education, healthcare, and poverty alleviation initiatives. Funding these programs also contributes to the country’s debt.
6. Budget deficits: Sri Lanka has experienced persistent budget deficits, meaning that government expenditure exceeds revenue. To cover these deficits, the government resorts to borrowing, which adds to the overall debt burden.
It is important for Sri Lanka to carefully manage its borrowing and debt levels to ensure sustainable economic growth and avoid excessive reliance on debt financing. Efforts are being made to improve debt management practices and explore options for debt restructuring and assistance from international partners.
