Against the backdrop of increased liabilities of the government, a delegation of the International Monetary Fund (IMF) is due here by mid this month to carry out a forensic audit on the arrears and other liabilities of the government, it is learnt.
According to a Cabinet paper submitted by Prime Minister Ranil Wickremesinghe at the special meeting yesterday, the IMF has agreed to a request by the government to identify ways and means to manage the expenditure arrears.
The paper says the outstanding government debt remained at Rs. 8,475 billion by the end of last year. It accounts for 74.9 percent of the GDP.
Asserting that the State Owned Enterprises suffered horrendous losses during the previous regime, a significant amount of liabilities emerged after the preparation of the 2016 budget.
The Prime Minister says in his paper that the dire situation has forced the government to take strong policy measures to revive the loss making state enterprises.
Highlighting that the government could have coped up with the situation if not for the present crisis in the global economy, he says the government has to weather the situation.
"While our debt servicing payment have increased due to the contingent liabilities, the opportunity of servicing or refinancing the debt has become difficult due to the downturn of global economy," he says. He says the global situation will remain for one year due to the Presidential Election in the US and the referendum in the European Union.
The government observes in the paper that the drop in global fuel prices will result in the revenue drop of oil producing countries. Then, these countries lower their spending, possibly leading to reduce the demand for Sri Lankan workers.
The slowdown in Chinese economy will result in the reduction of tourist arrivals here from that country. It is observed that if the US Federal Reserve increases rates, it will result in the rise of interest payments on foreign loans obtained by Sri Lanka.
Besides, the ISIS domination on the countries purchasing tea from Sri Lanka will have an impact on the local economy. (Kelum Bandara)