COLOMBO (AFP) - Sri Lanka is headed for a debt crisis, the finance ministry warned on Sunday (May 20), blaming a series of costly projects commissioned by the previous government for record-high repayments.
Finance Minister Mangala Samaraweera said payments of capital and interest would reach US$2.84 billion (S$3.8 million) this year, mostly to repay loans for extravagant projects under former president Mahinda Rajapakse.
"The crisis will further worsen next year," Mr Samaraweera said in a statement, adding repayments are expected to soar to US$4.28 billion in 2019.
"Repayments will go to pay the debts that were obtained during the Rajapakse regime for the waste, fraud and corruption committed by the oligarchies of the Rajapakses," he added.
Foreign reserves totalled US$9.9 billion at the end of April, the central bank says.
Mr Samaraweera said Mr Rajapakse's administration secured two high-interest loans worth US$1.5 billion in the final year of its decade-long rule.
Officials say Mr Rajapakse relied heavily on China to finance his grand infrastructure projects but many ended up becoming a burden on Sri Lanka's US$87 billion economy.
The government which ousted Mr Rajapakse in 2015 was forced to lease to China a loss-making port commissioned by and named after the strongman leader in his home constituency of Hambantota in the south.
An international airport built in Mr Rajapakse's name met the same fate, with revenue insufficient to meet the salary bill.
Only one airline operates out of Rajapakse International and attempts to privatise the airport have not progressed.
Sri Lanka is currently drawing down a three-year US$1.5 billion bailout package negotiated with the International Monetary Fund (IMF) in June 2016 after facing a balance of payments crisis.
The government sharply raised domestic fuel prices earlier this month following pressure from the IMF and its central bank to reduce the burden of heavy subsidies on its struggling economy.
The IMF has said it will only release the next tranche of its bailout if the country adjusts fuel prices based on the cost of production.
The economy has been on the mend since the IMF bailout was approved but the 3.1 per cent growth figure for 2017 was slower than expected.