Sri Lanka Allocates 50% of Income to Debt and Interest Payments - President

COLOMBO (News 1st); Sri Lankan President Ranil Wickremesinghe revealed that a staggering 50% of the country's income is currently allocated towards debt servicing and interest payments.

This revelation comes amidst mounting economic challenges and a pressing need for fiscal prudence.

The President emphasized that despite a substantial budget of over 7 trillion Sri Lankan rupees earmarked for the current fiscal year, a significant chunk—3.9 trillion rupees—must be directed towards debt repayment.

Within this allocation: One-third of the allocated funds is dedicated to settling outstanding loans, The remaining two-thirds are channeled towards servicing interest on existing debts., and Approximately 1.2 trillion rupees are set aside for government employee salaries.

President Wickremesinghe expressed concern over the sustainability of this financial scenario. After accounting for recurring expenses, there is very little left for essential activities.

Acknowledging the gravity of the situation, Sri Lanka has sought advice from international financial institutions. The International Monetary Fund (IMF), the World Bank, and the Asian Development Bank have all recommended measures to generate necessary funds domestically, he said.

The President highlighted that conventional options such as printing money or seeking funds from state banks are not viable at this juncture.

The only viable alternative was to increase the Value Added Tax (VAT), a decision that faced widespread criticism.

However, this move had a significant impact: for the first time, it eliminated the need to print additional money for the budget, said the President.

The effects of this decision are already evident nationwide, said the President adding that the Sri Lankan rupee, which was once valued at 370 against the US dollar, has strengthened to 300.

Additionally, the decrease in inflation has facilitated a reduction in interest rates, potentially stimulating business growth.

President Wickremesinghe urged citizens to adhere to this fiscal program. By doing so, the burden of loan repayment is anticipated to gradually diminish over the next two years, freeing up vital resources for national development endeavors. However, he cautioned that the future holds no promise without innovation in education and healthcare.