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‘Debt-management crisis due to 10 years of mismanagement’

Auditor General Gamini Wijesinghe.

The former Government has systematically window dressed fiscal data for over a decade to understate the national debt, Auditor General Gamini Wijesinghe said.

The AG was addressing a press conference at the Government Information Department Auditorium yesterday to brief the media on current state of affairs in debt management in Sri Lanka.

He said the former Government, which took loans in a manner that exceeds the ceiling limit of borrowings set by the law, had hidden those figures in financial statements or had transferred them to various other places.

Wijesinghe revealed a “dummy account” named “Investments on Borrowings” had been used to balance the account sheets since 2013.

He added the Finance Ministry has in writing admitted that it was really a dummy account and even recurrent expenditure came under this heading.

The Auditor General pointed out state debt management is in shambles today due to its mismanagement for over a decade. He said former Finance Ministry Secretary P.B. Jayasundara is a key figure to be blamed for the total wreck of financial discipline in the country leading to a deepened crisis on state debt management.

Noting that the state debt management is in shambles given the deliberate and complete disregard for financial norms and regulations for over a decade, the AG stated, “If anybody questions me of the total figure of the country’s debt as at present, my answer would be that only ‘Waima’ can sort it out. It is in such a mess especially due to mismanagement in the last 10 years. Taking loans in a manner that exceeds the ceiling limit of borrowings and then hiding those figures from accounting books or transferring those figures to various other institutions have led to this crisis. The former Finance Ministry Secretary, who was also dubbed as the ‘Economic Hit Man’, had committed many acts to ruin the country’s financial discipline,” he said.

Explaining the sorry state of affairs in the country’s debt, he said the total figure stood at Rs 10.3 trillion as at November 30, 2017 according to the Central Bank statistics. He said this figure according to the Finance Ministry was Rs 8.8 trillion as at December 31, 2016. “This means that we have a per capita debt burden of Rs 417,913,” he added.

“This figure is not inclusive of debt accumulated in Provincial Councils, Local Government Authorities and public enterprises. Added to that, there are Rs 826 billion unaccounted debt. Moreover, the massive loans obtained by Road Development Authority to the tune of Rs 136 billion are not in the books. To be plain, the Pension Department is paying the pension by obtaining loans and it has obtained loans to the tune of Rs 37 billion. That amount is also not included in the books,” Wijesinghe explained.

The AG pointed out that keeping the Finance Ministry under the purview of the President was a major factor that contributed to fiscal mismanagement. “The Finance Ministry started executing Presidential powers and the former Finance Ministry Secretary took high hand and did not even respect the Ministers. Violating financial regulations became the new norm,” he stated.

He concluded that urgent reforms are needed to improve the financial management in state sector, adding that if immediate actions were taken the country could get out of the debt trap at least by another 10 years.

He warned the situation could worsen as the peak of debt repayment comes in 2018-2020.

He added that the Chief Accounting Officers (Ministry Secretaries and Department Heads) must work with backbone to refuse to obey any ministerial order that contravenes the law. He accused that a “mafia of Ministry Secretaries” are blocking the passage of Audit Bill.