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Sri Lanka Fiscal Administration
In the 1960-77 period, budget deficits averaged about 8
percent of GDP. After 1977 increases in expenditures were not
matched by corresponding increases in revenues, and the result
was a rapid increase in the public debt. The budget deficit
averaged 15 percent of GDP from 1978 to 1986. It temporarily
dropped to 10.3 percent of GDP in 1984 when high tea prices
caused increased revenue, but in both 1985 and 1986 it was close
to 16 percent. The 1986 deficit of Rs28.1 billion was financed by
Rs3.8 billion in foreign grants, Rs12.1 billion in foreign loans,
and Rs11.5 billion domestic borrowing from banking and other
sources. Foreign loans and grants financed about 50 percent of
the budget deficits in the 1980s.
The public debt was about Rs150 billion at the end of 1986,
and the total interest payments by the government in 1986 were
Rs9.3 billion, or 5.2 percent of GDP. About 45 percent of the
public debt was owed to domestic sources. Medium- and long-term
debts accounted for 56 percent of the domestic debt, and
short-term loans made up the balance. In 1986 rupee securities
sold to the pension funds and the National Savings Bank accounts
were the principal instrument of the domestic medium- and
long-term debt. Domestic short-term financing was raised
primarily through treasury bills. The majority of the foreign
debt was negotiated at concessional terms
(see Sri Lanka - External Debt
, this ch.). In 1986 a total of Rs12 billion in new foreign loans
was contracted, of which Rs9.9 billion were for specific
projects. Repayments of earlier loans amounted to just over Rs3
billion. The accumulated foreign debt tended to increase annually
in rupee terms in the 1980s because of the steady depreciation of
the rupee in relation to the currencies of the lending nations.
Data as of October 1988
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