Sri Lanka's Debt Crisis Is So Bad The Government Doesn't Even Know How Much Money It Owes

Sri Lanka's Debt Crisis Is So Bad The Government Doesn't Even Know How Much Money It Owes

Trying to develop its infrastructure to increase its economic potential has plunged Sri Lanka deep into a pit of debt, pushing the country to the brink of bankruptcy and prompting an IMF bailout.

The official estimate of what Sri Lanka currently owes its financiers is $64.9 billion — $8 billion of which is owned by China. The country’s debt-to-GDP currently stands around 75% and 95.4% of all government revenue is currently going towards debt repayment.

This debt situation is clearly not sustainable, but there’s more:

In addition to racking up large amounts of government debt via the usual channels, it's now becoming evident that the previous government also utilized state-owned enterprises to take out additional loans on its behalf. While the full extent of this extracurricular lending seems unknown, current estimates peg it at a minimum of $9.5 billion — which is all off the books of the finance ministry.

“We still don’t know the exact total debt number,” Sri Lanka’s prime minister admitted to parliament earlier this month.

Much of Sri Lanka’s pile of debt accrued in the process of initiating an entire buffet of large-scale and extremely expensive infrastructure projects under the direction of former president Mahinda Rajapaksa.

Between 2009 and 2014 Sri Lanka’s total government debt tripled and external debt doubled, as the country engaged in a number of costly undertakings -- such as attempting to build a new, multi-billion dollar city in the middle of a jungle (which includes the world’s emptiest international airport), constructing one of the most expensive highways ever made, as well as other pricey endeavors, such as spending $42 million just to remove a rock from the harbor at Hambantota.

But this doesn’t necessarily mean that Sri Lanka's current administration is doing much better. 

Under President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, who came to office at the beginning of 2015, domestic debt grew by 12% and external debt by 25% without starting any new large-scale infrastructure projects.

This fact has not gone unnoticed by former president Mahinda Rajapaksa, who recently issued a series of public taunts, claiming that with the money the current administration has so far borrowed he could have built “two Mattala Airports, one Hambantota Port, one Norochcholai Coal Power Plant, one Colombo-Matara Highway, one Colombo-Katunayake Highway, not one, but two Colombo Port cities and one 500 MW Sampur Coal Power Plant...”

Sri Lanka may be in a debt trap that it can’t get out of. 

This year alone $4.5 billion is due to foreign lenders and next year $4 billion is owed — bills which the country has not yet figured out a way to pay.

Various interim solutions to the debt crisis have been proposed, such as offering debt-for-equity swaps to countries, such as China, that Sri Lanka owes big and privatizing and outright selling loss-incurring SOEs, which have yet to receive much interest.

The IMF did agree to provide Sri Lanka with a $1.5 billion bailout in the form of a loan in April after the country agreed to a set of criteria to attempt to right the course of its wavering economy. However, as reported by East Asia Forum, Sri Lanka’s Central Bank has stated that it is their intention to secure an additional $5 billion in loans after receiving these funds -- and corresponding seal of approval -- from the IMF as the debt trap continues getting deeper. 
===========================
Correction 10/3/2016: the $42 million rock was removed from Hambantota not Colombo.

I'm the author of Ghost Cities of China. Traveling since '99. Currently on the New Silk Road. Read my other articles on Forbes here.

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Official Statement by the Catalonia President on Article 155

Official Statement by the President on the invocation of
Article 155 of the Spanish constitution
Barcelona, 21 October 2017

All the proposals for dialogue addressed to Spain have had the same response: o silence, or

repression. In my last letter to the Spanish president I reiterated the need to speak and

reminded him that this is a clamor that is directed to us by many people, from many places.

Today, the Spanish Council of Ministers has been in charge of giving a real slam to this

clamor and this request and announces a series of measures and dismissals that directly

represent the liquidation of our self-government and the democratic will of the Catalans.

What the Catalans decided at the polls the Spanish government cancels at the offices.

Thus, the Spanish Government, with the support of the Socialist Party and Citizens party,

has undertaken the worst attack on the institutions and people of Catalonia since the decrees

of the military dictator Francisco Franco abolishing the Generalitat of Catalonia. Despising

the popular will expressed in a clear and massive manner in the elections of September 27,

2015, violating our Parliament and all the guarantees and rights of the members of the

Parliament who have elected the President of the Generalitat and have approved the

Government platform, the Spanish Government has illegally self-proclaimed the

representative of the will of the Catalans.

Without going through the polls, with little support and against the will of the majority, the

government of Mariano Rajoy wants to appoint a directory to remotely control the life of

Catalonia from Madrid.

This is not the first time that Catalan institutions have received the Spanish state once, even

with the help of the king, to reduce, reorient or directly suppress them. Every time the

Catalan people have superimposed stronger and more determined, aware that the

aggressions have always hidden the inability to make policy on the part of the State and that

consequently, had to reach higher levels of self-government. From the regionalism of the

early twentieth century to the 21st century sovereignty, the hegemonic idea in Catalonia has

always been the same.

The Generalitat is not an institution that is born with the current Spanish Constitution. Long

before the approval of the Magna Carta, the Generalitat was already functioning and was

provisionally reestablished, bearing in mind its historical legitimacy and the continuity that

Presidents Companys, Irla and Tarradellas had ensured in exile. No decision of the head of

government can erase this persistent fact over time: it has been the will of the Catalans that

has allowed us to defend and restore our institutions. What we have we have always won

with the strength of the people and the strength of democracy

The Catalan institutions and the people of Catalonia cannot accept this attack. The

humiliation sought by the Spanish Government as a guardian of all Catalan public life, 

from the Government to the public media, is incompatible with a democratic attitude and is

situated outside the rule of law. Because imposing a form of government not chosen by

citizens and without a parliamentary majority that supports it is incompatible with the rule of

law.

It is like acting with impunity against peaceful citizens, using old penal codes to keep two

persons of peace who have committed no crime, pursuing ideas and media, or irresponsibly

stimulating economic instability. Or as was the very serious irresponsibility of the PP with the

current president Mariano Rajoy as leader of an infamous collection of signatures against

Catalonia and the shameful ruling of the Constitutional Court later, I stress the after, that the

Statute of Catalonia had been approved by legal referendum and agreed. Those

irresponsible who despised the will of the Catalans and violated the constitutional pact of

1978 are those who want to rule us today.

I am aware, therefore, of the threat that weighs on all the people of Catalonia if the State

perpetrates its liquidating intent. We must confront ourselves to defend our institutions as we

have always done, in a peaceful and civilized way, but with dignity and reasons. That is why I

will ask the Parliament to set the convening of a plenary session where representatives of

citizen sovereignty, those elected by the votes of the citizens, we debate and decide on the

attempt to liquidate our self-government and our democracy, and act accordingly.

I want to send a message to the Spanish democrats. What is being done with Catalonia is

directly an attack on democracy that opens the door to other abuses of the same kind

anywhere, not just in Catalonia. Criminalize the dissident, deny reality and raise walls of

legality before the windows of the will of the Catalan people... if all these triumphs damage to

democracy, and therefore to the citizens, will be very severe and will lead to a monumental

setback. We must not allow that to happen.

I want to address a message to Europe. Not only to its political leaders but also, and

especially, to all European citizens, our brothers and sisters, with whom we share the

European citizenship.

If European foundational values are at risk in Catalonia, they will also be at risk in Europe.

Democratically deciding the future of a nation is not a crime. This goes against foundations

that unite European citizens through their diversity. Catalonia is an ancient European nation.

Is core to the European values. We do what we do because we believe in a democratic and

peaceful Europe. The Europe of the Charter of Fundamental Rights should protect each and

every one of us. You should know what you are fighting for in your home, we are fighting for

Catalonia. And we will continue to do so.

My fellow citizens: Long live Catalonia!

Carles Puigdemont Casamajó

President of the Catalan Government

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Source: http://premsa.gencat.cat/pres_fsvp/docs/2017/10/22/00/37/74735270-f58f-4bec-96dc-ea7566e33e46.pdf