International Financial Institutions and Debt 2nd South Asian Workshop Kathmandu 14-15 January 2009 Sri Lanka Country Presentation B. Skanthakumar Law & Society Trust (LST)

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

‘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

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

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

Debt Status 2007 Source: 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%

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 million Citicorp Investment Bank US$100 million Government of Germany US$55.2 million HSBC Ltd US$50 million LOANS Soft Loans US$932 million Grants US$287 million Commercial Loans US$150 million Programme loans US$52 million

Government Foreign Debt 1998 – 2007 (Rs millions) OWNERSHIP 1998 2001 2004 2007(a) Multilateral ADB IDA IBRD 211 730 94 583 111 771 600 289 686 136 064 146 853 521 477 079 235 741 226 926 221 579 792 291 307 258 757 231 Bilateral Japan Germany USA PRC India 234 585 132 374 30 132 45 789 1 670 1 135 305 511 185 051 32 953 58 064 3 219 1 855 465 513 301 434 56 301 57 078 3 342 10 311 593 630 327 711 94 346 52 814 22 668 14 843 Commercial Citibank Riggs National Bank Salomon Bros 14 958 -- 917 864 41 544 3 754 923 53 547 10 433 3 980 739 181 449 21 743 3 746 462

Debt Profile Source: 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 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 Debt Service Payments / Government Revenue 96.5 90.8 93.0 88.6 80.2

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

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

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 197.0 e.g. Southern Highway Construction 32.0 e.g. Upper Kotmale Hydro-Power 21.3 e.g. Walawe Left Bank Irrigation and Extension 13.5 Government of China 175.4 e.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

Major Donors and Projects (in US$ millions) in 2007 – II Source: Central Bank of Sri Lanka Annual Report 2007, p. 109 International Development Association 74.2 e.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

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?