By Paneetha Ameresekere Courtesy Ceylon Today

Foreign debt liabilities increased significantly by ‘six percentage points in Gross Domestic Product (GDP) terms’ to 41.2 per cent of the GDP last year (2018) led by a rapid depreciation of the Rupee and low GDP growth in the review period, the Finance Ministry, in a document released on 31 May, said.

Subsequently, interest payments, the single largest recurrent or current expenditure item in the Budget, increased by 0.4 percentage points to 5.9 per cent of GDP in 2018.

Overall economic growth fell to 3.2 per cent of the GDP in 2018, compared to 3.4 per cent in 2017 due to a deceleration of construction and mining and quarrying subsectors, the Ministry said.

Meanwhile, in GDP terms, total Central Government debt, both domestic and foreign, increased to 82.9 per cent of the GDP at end 2018 compared to 76.9 per cent at end 2017.

In related developments, domestic debt at end 2018 was marginally lower by ‘0.1 percentage point of GDP’ to 41.6 per cent of
the GDP compared to end 2017,
the Ministry said. Consequently, the share of domestic debt in the total outstanding debt decelerated to 50.2 per cent at the end 2018 from 54.2 per cent recorded at end 2017.

However, total debt service payments as a percentage of Government revenue increased to 108.8 per cent last year (2018) from 87.5 per cent in 2017, reflecting that total debt service payments outpaced the total revenue receipts of the Government in 2018, the Finance Ministry said.

Vis-à-vis, total Government expenditure, the ratio of total debt service payments to Government expenditure increased to 53.1 per cent in 2018 from 46.6 per cent in 2017, the Ministry said.

Meanwhile, Government debt service payments, including both amortisation (repayment of debt capital) and interest payments, increased by ‘2.6 GDP percentage points’ to 14.5 per cent of the GDP in 2018 from 11.9 per cent of the GDP in 2017.

Debt service payments in nominal terms increased by 30.3 per cent in 2018 with an increase in interest payments and amortisation payments by 15.9 per cent and 42.5 per cent, respectively. Amortisation payments on
domestic debt increased to 6.4 per cent of the GDP, while it was 2.2 per cent of the GDP on foreign debt.
Interest payments on domestic debt increased to 4.4 per cent of the GDP, while interest payments on foreign debt increased to 1.5 per cent of the GDP in 2018.

In related developments, the increase in recurrent or current expenditure by 8.4 per cent (Rs 162 billion) to Rs 2,090 billion, equivalent to 14.5 per cent GDP in 2018 over 14.4 per cent of the GDP 2017 was mainly driven by the rise in interest payments to 5.9 per cent of the GDP in 2018 from 5.5 per cent of the GDP in 2017, the Finance Ministry said.