Sri Lanka warned over mounting foreign debt

Sri Lankan President Mahinda Rajapaksa rubs his eye during a media briefing on the final day of the Commonwealth Heads of Governments Meeting (CHOGM) in Colombo, Sri Lanka, in this Nov. 2013 file photo. (AP)

Thursday 31 July 2014

COLOMBO: Sri Lanka’s economy was among the fastest growing in Asia, but it was vulnerable to sudden external shocks due to high levels of foreign commercial borrowings, the IMF said Wednesday.

The International Monetary Fund warned that the Indian Ocean island remained vulnerable despite economic gains after ending decades of ethnic war in May 2009.

“Recent improvements in the trade and current account balances notwithstanding, Sri Lanka remains vulnerable to external shocks,” the IMF said after its latest consultations with Sri Lankan authorities.
“The IMF staff urges caution with respect to external borrowing of Sri Lanka through the banking system.”

Sri Lanka’s foreign borrowings were currently $42.4 billion, up from 39.7 billion at the end of last year, the IMF said noting that it was high.

The IMF said there should be a “more ambitious” debt reduction target and also asked Sri Lanka to improve its tax collection.