Annual Report 2008 - Ministry of Finance and Planning

2. Fiscal Developments - 2008
69
High Interest Cost
Interest cost registered an increase of 16 percent and
reached Rs. 213 billion in comparison to Rs. 183 billion in
2007. The high domestic interest rates prevailed during the
year consequent to the tight monetary policy adopted by the
Central Bank of Sri Lanka and investor preference moving
to short term maturities in a high inflationary environment
coupled with new borrowings to finance the deficit
contributed in the high interest expenditure. The stability
of the exchange rate in the first eleven months helped to
mitigate the pressure on the interest cost. However, the
interest cost as a percentage of GDP reduced to 4.8 in 2008
from 5.1 in 2007.
Chart 2.9
Trends in Interest Payments
Table 2.19
Yield Rates
Year Treasury Bills Treasury Bonds
91 days 182 days 364 days 2 year 3 year 4 year 5 year
September 2007 18.20 17.47 17.31 17.27 16.45 14.32 14.22
March 2008 18.39 18.96 19.00 - 17.05 - -
June 2008 17.29 18.17 18.53 17.83 16.93 - -
September 2008 17.22 18.28 19.06 19.33 19.22 19.09 17.00
December 2008 17.33 18.57 19.12 20.53 20.34 19.60 -
Change(Sept 07/Sep 08) (0.89) 0.36 1.32 1.27 1.44 3.16 2.78
March 2009 (4th week) 14.62 16.16 16.63 18.06 18.10 18.03 17.00
Source: Department of Treasury Operation
Ministry of Finance and Planning Sri Lanka
Annual Report 2008