Buffer to settle country’s loans | Daily News

Buffer to settle country’s loans

Taking note of the biggest loan repayments coming in 2018-2019, the Government opts to maintain a cash buffer and obtain only long term loans over 10 years from now, Finance Ministry Secretary Dr. R.H S Samaratunga said.

Speaking to the Daily News yesterday, Dr Samaratunga said the net foreign reserves of the country stands at USD 7.2 billion at present, and therefore the Government is in a better position to negotiate with the financial institutions to obtain longer term loans.

However, he stressed the importance of maintaining foreign reserves at around USD 7-9 billion to be in a stronger position to go for long term loans.

“If the foreign reserves decline in future, we will be out of options, but to obtain short term loans,” he explained.

The Secretary also said his Ministry is in the process of making a plan to have a cash buffer to settle the country’s dues in 2018-2019, the peak in domestic and external debt repayment. Prime Minister Ranil Wickremesinghe told Parliament recently that the country has to pay Rs. 1,974 billion in 2018 and Rs. 1,515 billion in 2019 for public debt servicing based on the outstanding debt as at end of August 2017.

Dr. Samaratunga said the new Fiscal Liability Management Act the Government plans to bring in will allow borrowing in advance for debt servicing in future. “For example, if interest rates come down internationally in 2018, it is advantageous for us to borrow in 2018 rather than waiting for 2019. In that way you borrow more in 2018 and probably less in 2019. The idea is that we borrow in advance when the conditions are good enabling us to settle our dues in the future,” he explained.

“It is for the first time we are going to do such a thing. What we have been doing is finding money immediately before the due date. Now we hope to switch for a long term programme,” he added.

The Secretary observing that the drafting stage of new Fiscal Liability Management Act has been completed said it will come to Parliament within the next two months. Commenting on the new legislation Central Bank Governor Dr. Indrajith Coomaraswamy on Friday said that it would enable the Government to borrow more than the requirement for the Budget of that particular year. “For the moment, the Appropriation Act limits Government borrowing. With the new legislation, we can collect extra money to manage our future debts,” he stated.

The Governor pointed out that there are no domestic debt maturities in the last five months of this year, and it enables the Government to collect a buffer of resources to manage the peak of domestic debt repayments next year. The domestic debt portfolio mainly consists of Treasury Bonds and around 30 percent of them will mature by 2019. USD 2.3 billion worth of Sri Lanka Development Bonds, which is a USD denominated domestic debt instrument, will mature by 2018. 


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