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

2 Socio-Economic Indicators Area sq km Population (2001) Total: million Female: million Male: million By Ethnicity (2001) Sinhala: 13.8 million Muslims: million Up-Country Tamils: NE Tamils: Others: By Religion (2001) Buddhist: million Islam: million Hindu: million Christian: 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

3 ‘Mahinda Chintana’ 10 Year Development Framework ( ) 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

4 Government Expenditure (2009 estimates) Source: Appropriation Bill 2008 Total Expenditure Rs Defence Rs % of Total Health Rs % of Total Education Rs % of Total Housing Rs Social Welfare Rs

5 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

6 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%

7 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

8 Government Foreign Debt 1998 – 2007 (Rs millions) OWNERSHIP (a) Multilateral ADB IDA IBRD Bilateral Japan Germany USA PRC India Commercial Citibank Riggs National Bank Salomon Bros

9 Debt Profile Source: State of the Economy 2008, Institute for Policy Studies, p a Government Debt / GDP Total Foreign Debt / Exports (b) Foreign Debt Service / Exports (b) Debt Service Payments / GDP Debt Service Payments / Government Revenue

10 Debt Service Ratio (Source: Central Bank of Sri Lanka Annual Report 2007) % of Exports % of Current Receipt

11 Debt Service Burden (US$ millions) Source: State of the Economy 2008, Institute for Policy Studies, p. 21 Donor Total Japan Multilateral Commercial

12 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 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 e.g. Norochcholai Coal Power Plant e.g. 100 Railway Carriages 12.5 Asian Development Bank e.g. Southern Transport Development 19.1 e.g. Road Network Improvement 16.2 e.g. Power Sector Development 13.1

13 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

14 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?