Ajith Nivard Cabraal

MP Cabraal: Not without fault on debt default claims


As of now (February 2021), the total ISBs outstanding is USD 14 billion, which is only 16.7 percent of Sri Lanka’s total debt. None of the other creditors who hold 83.3 percent of Sri Lanka’s debt seem to show any sign of concern or stress about its repayment ability. We have to repay only around US

Sunday Observer | February 28, 2021


Partly True

Fact Check

The state minister made two claims: 

  1. None of the creditors who hold Sri Lanka’s non-ISB debt seem to show any sign of concern or stress about its (Sri Lanka’s) repayment ability 
  1. ISB amortisations amount to USD 1 to 1.5 billion per annum and authorities have to repay this amount to avoid default.  

Claim 1: Concerns regarding repayment or credit risk can be assessed by the rate of interest demanded by borrowers and willingness to lend. The majority of Sri Lanka’s government non-ISB debt consists of  domestic rupee debt (53.5% of total debt). On this, interest rates have declined to very low levels, indicating low concern over credit risk. However, of the remaining non-ISB debt, it is not possible to evaluate the credit risk perception of non-market foreign debt (bilateral and multilateral loans) since new loan interest rates are not always in the public domain (e.g. March 2020 CDB loan). Furthermore, interest rates SLDBs (comprising 3.3% of total debt) have increased across the board between January 2020 and January 2021. For example, two-year SLDB increased from 5.79% to 6.92% and 54% of the volume issued at auctions during this period was unsubscribed, an additional indication of higher credit risk perception. 

Claim 2: Sri Lanka does have required annual ISB capital repayments of an average USD 1,405 million each year from 2021 to 2030, which is in the range stated by the state minister. However, he failed to account for the fact that in addition to capital repayments, Sri Lanka must repay interest on ISBs in order to avoid default. As of today, based on the 6.64% weighted average coupon rate (the interest rate paid on a bond) on total ISBs, Sri Lanka will have to pay USD 933 million on average each year in interest costs, in addition to capital repayments.  

On his first claim, the state minister was right, in that over half of total debt holders show no sign of stress, though it is not possible to substantiate the claim that no other creditors show signs of stress. On his second claim, he excluded ISB interest payments and thus understated the total liabilities arising due to ISBs that need to be honoured in order to avoid default. 

Therefore, we classify the state minister’s claim as Partly True.  

*FactCheck’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck will revisit the assessment. 



Central Bank of Sri Lanka, Outstanding International Sovereign Bonds as at 01st December 2020, available at: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/about/outstanding_isb_as_at_01_december_2020_e.pdf 

Central Bank of Sri Lanka, Press Releases – Government Securities, available at: https://www.cbsl.gov.lk/en/press/press-releases/government-securities 

Central Bank of Sri Lanka, Weekly Economic Indicators, 12 March 2021, Table 3.2, available at: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/wei/WEI_20210312_e.pdf  

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