Govt. attempting to borrow US$1 billion in international markets: Harsha

3 February 2012 04:00 pm - 0     - {{hitsCtrl.values.hits}}

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The Government is planning to borrow US$1 billion in the international markets besides attempting to borrow US$500 million via the Bank of Ceylon. After the IMF had ended the US$ 2.6 billion bailout package charged UNP National List MP Harsha de Silva charged today.

Following is the text of the statement issued by him yesterday explaining the current financial position the country is in today.

“The verdict is out and for all practical purposes the IMF has abruptly ended the US$ 2.6 billion bailout package to Sri Lanka with US$ 800 million yet to be released given the failure of the government to keep to the agreed targets; particularly the net international reserve target.

The unsustainable policy stance of fixing the currency at a highly overvalued and arbitrary level of LKR 114 to the USD by selling more than a third of the external reserves, most of it borrowed, and thereafter printing money to offset lost liquidity to maintain artificially low interest rates have resulted in a massive trade deficit and continued pressure on the LKR.

The trade deficit of close to US$9 billion is unprecedented and unlike in previous years it cannot be offset by remittances and tourism earnings; a yawning gap of around 40 per cent remains. If as the governor says Sri Lanka has more than sufficient reserves and thus there is no need for additional borrowing this year then it is of no consequence that the IMF has stopped the facility. But, as was the case last week where the completely politicised Governor of the Central Bank attempted to fool the public by falsely stating a higher than the true rate of interest on the IMF loan this statement is nothing but pure gobbledygook.

The Government is already planning to borrow US$1 billion in the international markets besides attempting to borrow US$ 500 million via the Bank of Ceylon.  Given the history of our sovereign bond program and the current global scenario Sri Lanka will not be able to borrow for anything less than twice the rate offered by the IMF.

Arrogance and incompetence of the regime will in the coming months begin to bite as the adjustment on the exchange rate will have to be much bigger and the impact on the public will become much larger.

In the meantime, the export industry would also have felt a significant blow with increasingly less resources being invested in the sector relative to the GDP.  Ten years ago exports accounted for some 37per cent of GDP, but today, it is at 17 per cent and dropping.”    

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