Cabraal says due to sin of floating rupee country has to pay extra Rs 1,155 bn in settling foreign debt

By Saman Indrajith

Sri Lanka would have to pay an additional Rs. 1,155 billion as its loan settlements in the years from 2020 to 2024 due to the floating of the rupee value, Parliament was told yesterday.

State Minister for Money and Capital Market and State Enterprise Reforms, Ajith Nivard Cabraal said that while he was the Governor of the Central Bank from 2012 to 2014 the highest priority had been given to maintaining the rupee at a stable rate. “Some economic experts came up with the idea of free floating. Later, it was implemented and we got floating currency value. Now, we see the results.”

Minister Cabraal said so responding to a question by SJB Colombo District MP S. M. Marikkar, who asked the Minister to inform the House of the amounts of money which the government had to pay back as local and foreign debts between 2020 to 2024, separately in respect of each year.

The Minister said that Sri Lanka had to settle foreign debt worth USD 4,095 million (Rs 760 billion) in 2020, USD 3,910 million (Rs 726 billions) in 2021, USD 4,481 million (Rs 832 billion) in 2022, USD 4,242 million (Rs 787 billion) in 2023 and USD 4,404 million (Rs 817 billion) in 2024.

Domestic debt that had to be settled in 2020 amounted Rs. 1,230 billion, the minister said, adding that the amount was Rs 1,557 billion for 2021. The local debt to be settled in 2022 was Rs 1,128 billion; Rs 1,120 billion for 2023 and was Rs 899 billion for 2024.

MP Marikkar asked whether Sri Lanka would obtain more foreign loans to settle its debt. “The amount of debt burden is increasing and the value of rupee is depreciating. Today, the value of a US dollar is 196 rupees. What is the government planning to do about this?”

Minister Cabraal said that the amounts to be settled as foreign debt would have had a different rupee value if his successors as the Governors of the Central Bank had taken action to maintain a fixed rupee value the way he had done. “We maintained a fixed rupee value at Rs 131 against the US dollar. Later, it was changed and let the rupee value float. No, we see the results. The amount of foreign debt to be settled in 2021 in rupees is 726 billion. It would have been Rs 536 billion instead had the rupee value been fixed. The amount of foreign debt to be settled in 2022 is Rs. 832 billion and it would have been Rs 587 billion instead. Similarly, the amount of foreign debt for the years 2023 and 2024 are Rs 787 billion and Rs 817 billion respectively. It would have been Rs 555 billion and Rs 577 billion instead.”

 “The value of the debt has arisen since the exchange rate of the rupee was not maintained,” Minister Cabraal said, noting that since the new government came to power efforts had been mae to maintain the rupee value. “There have been occasions where we faced pressure but during the last several days of the year, the rupee value increased against some currencies. That is a positive sign.”