Government Debt

Sunday Leader on Deshal's lecture : High govt borrowing crowding out private investment

From the Sunday Leader

Continuous high deficits and cumulative public debt has been one of the driving factors behind the Indian Ocean Island economy’s macroeconomic volatility is adversely affecting the investment climate, one of Sri Lanka’s budding economist said recently.

“High government borrowing levels influence higher interest rates, crowding out private investment. Recent BoP (Balance of payment) weakness has been largely influenced by external debt repayments with implications for the depreciation of the Sri Lankan Rupee. At other times fiscal expansion drives imports, contributing to BoP stress and depreciation of the Rupee. Episodes of inflation in the past were influenced by then Central Bank’s accommodative monetary policy to ease stress on government debt servicing,” said Senior Economist Deshal De Mel at a public forum.

Read article in full.