UK considering loan to indebted Sri Lanka
The UK government’s Export Credits Guarantee Department is considering whether to guarantee a bank loan of around US$50 million to the Sri Lankan government. The loan would be used to pay Cleveland Bridges – owned by Al-Rushaid of Saudi Arabia – to build bridges in the South Asian country.
In 2007 then Labour junior minister for development Shahid Malik approved an earlier UK government backed loan for bridges in Sri Lanka, even though documents released under the freedom of information act reveal that it was seen by civil servants to be a “finely balanced case”. The IMF and World Bank viewed Sri Lanka as being at moderate risk of debt crisis, with a foreign public debt of 30 per cent of GDP.
Since 2007, Sri Lanka’s growth has been slower than predicted, public debt owed outside the country has increased and in 2009 the worsening financial crisis led the South Asian country to begin borrowing from the IMF; loans from the international institution have so far totaled $1.75 billion.
By the end of 2009 Sri Lanka’s foreign public debt reached $19 billion; 40 per cent of GDP. In 2009, 16 per cent of government revenue left the country in debt repayments. In 2010 foreign governments lent Sri Lanka $1.2 billion.
The UK government has refused to release its assessments of the financial and social implications of the proposed loan. Jubilee Debt Campaign wrote to Development Minister Andrew Mitchell in July to express concern about the then proposed loan given Sri Lanka’s debt status, but have yet to receive a reply.
UPDATE:
30 September 2011 - This story previously said the loan had been agreed. The ECGD have informed us that other news reports are wrong, and the proposed loan is still under consideration.