Annual Report 2008 - Ministry of Finance and Planning

2. Fiscal Developments - 2008
134
Debt Management
The Appropriation Act passed by the Parliament for the
Financial year 2008 authorized a gross borrowing limit of
Rs. 708 billion. The Government was able to manage its
fiscal operations within the borrowing limits during the
year by limiting its gross borrowings at Rs. 689 billion. The
annual borrowing programme deviated from the originally
planned programme due to the lack of funds from external
commercial sources and pre-mature withdrawals of foreign
investments in the rupee denominated government security
market stemming from the turmoil in the international
financial markets and the associated uncertainties. In
addition, the limited resources availability in the non bank
sector also contributed to the deviation.
The gross borrowing from the domestic sources exceeded
the original target by Rs. 101 billion to reach Rs. 559 billion
while the gross borrowing from foreign sources was limited
to Rs. 130 billion.
Table 2.37
Government Gross Borrowing by Instrument - 2008
Source
Rs. bn
Domestic 559.4
Rupee loan -
Treasury Bonds 406.5
Treasury Bills 62.9
SLDB/FCBU 44.4
CBSL advances 15.6
Other 30.9
Foreign 129.6
Concessional 98.5
Non concessional 31.1
Total 689.00
The total debt of the Government amounted to Rs. 3,578
billion as at the end 2008, which is an increase of Rs. 576
billion compared with the Rs. 3,042 billion at end 2007. The
increase was 18 percent. However, the debt in relation to
GDP decreased steadily for the forth consecutive year, to
81.1 percent from 85 percent in 2007. Total debt consists
of Rs. 1,449 billion of foreign debt and Rs. 2,129 billion of
domestic debt reflecting 59.5 percent of total debt on account
of domestic debt. The foreign debt portfolio reduced to 40.5
percent of the total debt from 43.5 percent. The domestic debt
component increased mainly due to the high borrowings
from the domestic markets in the latter part of the year due
to the non materializing of anticipated foreign borrowings
from external capital market and the premature withdrawals
of foreign investments in the event of the financial crisis and
the overshooting of borrowing requirement due to revenue
shortfalls and the overruns in the recurrent expenditure.
The total foreign investments in the government securities
increased to Rs. 71 billion by mid September from Rs 49
billion as at end 2007. However, this was reversed in the
latter part, where the foreign withdrawals amounted to
Rs. 47 billion, creating heavy pressure on the domestic
borrowing as well as the stability of the domestic rupee
market. With these developments funding shortfall had to
be raised from the domestic market, resulting borrowing
through treasury bonds and bills increasing to Rs. 407 and
Rs. 62 billion respectively. The limitation of funds in the non
bank sources, the government had to rely heavily on the
borrowing from the banking system resulting the net credit
to the government by the banking system reaching Rs. 195
billion in 2008 compared to the Rs. 16 billion in 2007.
Sources: Department of Treasury Operations
Central Bank of Sri Lanka
Ministry of Finance and Planning Sri Lanka
Annual Report 2008