Sri Lanka’s government has improved its debt management, reaching its debt-to-GDP goal for year’s end by mid-year, data released by the central bank showed.

However, analysts said the government has been encouraging state-owned banks to borrow on international capital markets. And a week ago, the International

Monetary Fund said medium-term sustainability depended on Sri Lanka’s “judicious use of foreign borrowing.”

The ratio of debt to gross domestic product has fallen to 74.3 percent, which was the year-end target set by the central bank. The indicator stood at 78.3 percent at the end of 2013.

The average maturity of domestic debt extended to six years in mid-June from last year’s 4.8 years. Foreign-debt maturity increased to 10.4 years from 9.8 years in the same period.

In absolute terms, Sri Lanka’s total debt stood at 7.18 trillion rupees ($55.19 billion) at the end of March this year, compared with 6.79 trillion rupees by the end of 2013.

Since the end of its civil war with Tamil separatists in May 2009, Sri Lanka has increasingly been borrowing through expensive commercial loans instead of bilateral credit to fund its massive infrastructure projects.

It has also been borrowing through state banks and those loans, mainly for government spending, are not reflected in the latest numbers, analysts say.

In the 17 months ended in September 2013, state banks have borrowed $1.85 billion from international markets at commercial rates.

The IMF recently urged a cautious approach to such borrowing.

The IMF said a Market Access Debt Sustainability Analysis indicated the sensitivity of Sri Lanka’s debt sustainability to growth and foreign exchange shocks. (arab news)