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Govt. warned against breach in borrowing limit

Former Finance Minister Mangala Samaraweera has warned the government against an imminent breach in the borrowing limit and has called for a resolution in Parliament to raise the ceiling.

“For the period of January 01, 2020 to April 02, 2020, the Government has borrowed Rs. 650.15 billion through Sri Lanka Development Bonds, a dollar-loan from the China Development Bank and primary auctions of Treasury bills and Treasury bonds. Furthermore, Central Bank holdings of Government securities and other data on Central Bank open- market-operations suggest significant direct monetary financing of the deficit. This will add to the sum of government borrowings,” Samaraweera said in a statement.

He added that the borrowing limit, approved by a resolution of Parliament on 23 October 2019 for the period 1 January 2020 to 30 April 2020, is Rs. 721 billion. Last year, the Treasury issued 194 billion in bills and bonds between 3 April 2019 and 30 April 2019. Therefore, it is almost certain that a breach of the borrowing limit is imminent.

“Once the borrowing limit is reached, there will be no legal authority under which public debt can be issued. As a result, the government may face insurmountable challenges in raising the funds necessary for managing this crisis. Due to these legal complications, there may also be delays in drawing down the $128 million (Rs. 24.4 billion) soft-loan granted by the World Bank for fighting COVID-19.”

“Therefore, in light of these urgent and unforeseen requirements arising from the pandemic, I urge the government to immediately move a resolution in Parliament to raise the borrowing limit. I am certain the entire Parliament will support such a resolution that responsibly increases the borrowing limit,” Former Finance Minister added.