International Financial Institutions

and Debt2nd South Asian Workshop

Kathmandu 14-15 January 2009Sri Lanka Country

PresentationB. Skanthakumar

Law & Society Trust (LST)

2

Socio-Economic Indicators

Area 65 610 sq km

Population (2001)• Total: 18 797 million • Female: 9 438 million• Male: 9 359 million

By Ethnicity (2001) • Sinhala: 13.8 million• Muslims: 1 339 million• Up-Country Tamils: 855

000• NE Tamils: 732 000• Others: 127

000

By Religion (2001)• Buddhist: 12 986 million• Islam: 1 435.9 million• Hindu: 1 312.9 million• Christian: 1 185.9 million

Life Expectancy at birth (2007) 71.6 years

Infant Mortality Rate (2005) 12 per 1000

Adult Literacy Rate (2005) 90.7%

Human Development Index 0.74

3

‘Mahinda Chintana’ 10 Year Development Framework (2006-2016)

• 2003 PRSP ‘Regaining Sri Lanka’ rejected

• No New Borrowings from IMF & IBRD

• Infrastructure Development (energy, telecommunications, roads, ports, airports, irrigation etc.) prioritised

• ‘Look East’: Chinese, Indian and Iranian state capital

• Non-Privatisation Policy (abolition of PERC); SOE Reform & PPP instead

• Subsistence to Commercial agriculture (agro-exports)

• Foreign Investment Friendly incentives extended

• 300 Rural Garment factories programme

4

Government Expenditure (2009 estimates)Source: Appropriation Bill 2008

Total Expenditure Rs980 634 460 000

Defence Rs177 060 039 000

18% of Total

Health Rs58 649 894 000

5.8% of Total

Education Rs21 117 510 000

2.12% of Total

Housing Rs997 781 000

Social Welfare Rs873 358 000

5

Exports (2007)Export Composition (2007/1977)• Industrial Goods: 76% / 14%

• Mainly textiles & garments• Agricultural products: 20% / 79%

• Mainly tea & rubber

Export Markets • USA (RMGs)• EU esp. UK (Tea & RMGs)• India (Vanaspathi, Copper)

Gross Export Earnings• Textiles & RMGs: US$3 341million

• 60% inputs imported• Remittances: US$2 502 million

• Tea: US$1 025 million

• Tourism: US$385 million

6

Debt Status 2007Source: Central Bank of Sri Lanka, Annual Report 2008

Total Govt Debt: US$27 billion / Rs 3070 billion

Domestic Debt: 58% Foreign Debt: 42%

Concessional Debt: 83% Non-Concessional: 17%

Total Debt Service: US$4.5 billion / Rs500.5 million

External Debt Denominations: SDRs: 37.5% Yen: 25% US$: 19.7% Euro: 11% Others: 6.8%

7

Donor & Loan Profile (2006)Source: Central Bank of Sri Lanka, Annual Report 2006

LENDERS

Government of Japan US$262.5 million

Asian Development Bank US$174.9 million

International Development Association

US$100.2 millionCiticorp Investment Bank

US$100 millionGovernment of Germany

US$55.2 millionHSBC Ltd

US$50 million

LOANS

Soft Loans US$932 million

Grants US$287 million

Commercial Loans US$150 million

Programme loans US$52 million

8

Government Foreign Debt 1998 – 2007 (Rs millions)

OWNERSHIP 1998 2001 2004 2007(a)

Multilateral ADB IDA

IBRD

211 73094 583

111 771600

289 686136 064146 853

521

477 079235 741226 926

221

579 792291 307258 757

231

Bilateral Japan

Germany USA PRC

India

234 585132 37430 13245 7891 6701 135

305 511185 05132 95358 0643 2191 855

465 513301 43456 30157 0783 342

10 311

593 630327 71194 34652 81422 66814 843

Commercial Citibank

Riggs National

Bank Salomon

Bros

14 958--

917

864

41 544--

3 754

923

53 54710 4333 980

739

181 44921 7433 746

462

9

Debt ProfileSource: State of the Economy 2008, Institute for Policy Studies, p. 20.

2004 2005 2006 2007 2008a

Government Debt / GDP

102.3 90.6 88.7 85.8 82.3

Total Foreign Debt / Exports (b)

134.8 120.6 127.5 129.5

134.8

Foreign Debt Service / Exports

(b)

6.4 3.6 7.1 8.2 11.5

Debt Service Payments / GDP

14.4 14.1 15.1 14.0 14.4

Debt Service Payments / Government

Revenue

96.5 90.8 93.0 88.6 80.2

10

Debt Service Ratio(Source: Central Bank of Sri Lanka Annual Report 2007)

1990 2000 2004 2006 2007

% of Exports

17.8 14.7 11.6 12.7 13.0

% of Current Receipt

15.3 12.2 9.4 9.8 9.9

11

Debt Service Burden (US$ millions) Source: State of the Economy 2008, Institute for Policy

Studies, p. 21

Donor 2006 2007

2008

2009 2010

Total 538.1

589.1

707.4

581.8

576.2

Japan 198.0

219.1

219.8

214.6

210.5

Multilateral 135.6

148.4

167.9

182.2

192.5

Commercial 43.1 41.0 139.6

7.4 6.7

12

Major Donors and Projects (in US$ millions) in 2007 – I Source: Central Bank of Sri Lanka Annual Report 2007, p. 109

Government of Japan / JBIC 197.0e.g. Southern Highway Construction

32.0e.g. Upper Kotmale Hydro-Power 21.3e.g. Walawe Left Bank Irrigation and Extension 13.5

Government of China 175.4e.g. Norochcholai Coal Power Plant 142.8

e.g. 100 Railway Carriages 12.5

Asian Development Bank 134.6 e.g. Southern Transport Development 19.1

e.g. Road Network Improvement 16.2 e.g. Power Sector Development 13.1

13

Major Donors and Projects (in US$ millions) in 2007 – II Source: Central Bank of Sri Lanka Annual Report 2007, p. 109

International Development Association 74.2e.g. Road Sector Assistance 18.9

e.g. North East Housing Reconstruction 17.9 e.g. Renewable Energy for Rural Development 9.8

European Investment Bank 42.9

e.g. Post-Tsunami Line of Credit 28.9

e.g. DFCC Global Loan 13.9

Government of Denmark 20.8 e.g. Colombo Sewerage Rehabilitation 11.4

14

Trends

Shift from multilaterals (esp. IMF & IBRD) to bilaterals and commercial banks (e.g. HSBC, Citicorp etc.)

Shift from Concessionary to Commercial borrowing (avoidance of conditionalities)

Shift from Western donors to Asian donors (Kohona doctrine)

Sri Lanka into the Debt Trap?