ECONOMYNEXT – Sri Lanka has shuffled several Chinese loans to state agencies and companies in a bid to understate central government debt in 2010 and 2013, State Minister Eran Wickramaratne has said in parliament responding to queries raised by the state audit chief.
Wickremerante said the Auditor General was correct to raise the queries, but the loans had been hidden in 2010 and 2013.
“Cabinet approval was taken during the time of ex-President Mahinda Rajapaska to transfer loans to several companies,” Minister Wickramaratne said.
Sri Lanka’s Auditor General, completely disclaimed the accounts of the finance ministry in 2016, with queries made in previous years remaining unresolved.
In 2017 the AG gave a qualifed opinion, saying, except for several matters where problems still remained, the accounts were mostly in order.
The Auditor General had said that the national debt is 80.5 percent of gross domestic product, not 77.6 percent as presented in the annual report, because of the way some domestic debt and also foreign debt was accounted for.
“In other words what he has said is that the national debt is understated by about 389 billion rupees,” Wickramaratne said.
Minister Wickramaratne said in 2010 and 2013, ex-President Rajapaksa, who was then finance minister, had obtained cabinet approval to shuffle several loans from the central government to state firms, which had contributed to understating debt.
Loans taken from China to build the Hambantota Port, were taken off the central government balance sheet and placed in the Sri Lanka Port Authority.
Cabinet approval had been sought on January 09, by President Rajapaksa and approval had been given on January 11, to shuffle the debt, he said.
In the case of the Norochocholai coal plant three loan agreements had been signed, and the loans were transferred to the Ceylon Electricity Board and a new company called Lanka Coal Company (Pvt) Ltd, Wickramaratne said.
When Mattala Airport was built, in October 11, 2010 cabinet approval had been sought by ex-President Rajapaksa to remove the loans from the central government balance and transfer them to Airport and Aviation Services of Sri Lanka Ltd, he said.
In Sri Lanka it is the practice of some foreign lenders to give loans directly to the state instead of an agency, even if it had revenues to finance the loans which was the case with Ceylon Electricity Board.
Direct borrowing by the Treasury reduces the risk to the lender and allowing them to give a lower rate. The money is then ‘on-lent’ to the agency.
In the case of the CEB, which gave subsidies outside the budget (understating the budget deficit), forcing it to run losses, it was unable to service some of the debt, and the central government had to service the loans.
Separately the AG had said that the loans given by China to build the Norochcholai coal plant was perhaps the loan that has brought the biggest financial benefits to country after loans taken from Western nations to build hydro-electric dams on the Mahaweli river.
Meanwhile some agencies like the Road Development Agency had also borrowed directly from bank with a Treasury guarantee, without having revenues to service the loans, with a Treasury guarantee. (Colombo/June30/2018)