August 21, 2019
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    GOVT DEBT DECLINES

    May 06, 2018

    The Central Government debt as a percentage of the GDP had declined to 77.6 percent by end 2017 from 78.8 percent at end 2016, the 2017 Annual Report of Central Bank (CB) states. The reduction in the debt to GDP ratio in 2017 was mainly due to the deceleration in the growth of debt accumulation and the increase in the nominal GDP growth.

    The Central Government debt in nominal terms rose to Rs. 10,313.0 billion by end 2017 from Rs. 9,387.3 billion at end 2016. Of the total outstanding domestic debt increased to Rs. 5,594.4 billion by 4.7 percent while outstanding foreign debt increased substantially to Rs. 4,718.6 billion by 16.6 percent. Holding another view on the country current debt status, former Central Bank Governor Ajith Nivard Cabraal, at a media briefing last week, said the country’s debt to GDP had grown in the past three years while economic growth and foreign direct investments have been low.

    Cabraal said the debt to GDP ratio has been reversed from its downward trend from 2010 to 2014 increasing the ratio to 77.6 percent last year from 71.3 percent in 2014. The former CB governor also noted reserves of US$ 9.9 billion stated by the CB was primarily from borrowings and not from mega foreign investments. However, the CB is content with the current gross foreign reserves which stand at US$ 10 billion according the annual report released last week.

    Gross official reserves increased to US$ 8.0 billion by end 2017 with an accompanying qualitative improvement. The overall balance of the balance of payment recorded a surplus of US$ 2.1 billion in 2017 after two years of deficit as a result of significant inflows to the financial account, the bank stated.CB Governor Dr. Indrajit Coomaraswamy at the launch of the report said it is absolute nonsense to say that depreciation of the rupee aggravates the debt liability of the country.

    Dubbing the claim as a myth, the governor said when money is borrowed in Dollars it has to be paid back in the same currency and noted that the country stands to gain when the local currency is weak at the time of borrowing. The rupee weakened by 1.3 percent last month, 2.5 percent so far this year and 2.0 percent last year. - LF

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