UPDATED: The proposal by the government to issue an additional Rs. 400 billion worth of Treasury Bills in a bid to increase its local borrowings has been defeated in Parliament a short while ago.

Thirty one members voted in favour of the proposal while 52 voted against.

The government was keen on issuing Treasury Bills and Bonds locally and raising local borrowings to meet its expenditure since its spending has increased and revenue has decreased due to the government employees’ pay hike and the slashing of essential items and fuel prices introduced through the new government’s interim budget, according to the latest data of the Central Bank of Sri Lanka.

Latest data from the Central Bank of Sri Lanka revealed that there has been a huge increase in the local borrowings by the new government since January 2015.

Government spending has increased and its revenue has decreased due to the state sector employees’ pay hike and the slashing of prices on essential items and fuel through the new government’s interim budget.

Hence, while the government is keen on issuing Treasury Bills and Bonds locally and raising its local borrowings to meet its expenditure, the Treasury Bills and Bonds issued locally within the first three months of this year rising to some Rs. 216 billion is a significant feature.

This means that by issuing Treasury Bills and Bonds on behalf of the government, the Central Bank of Sri Lanka has raised a loan of Rs. 216 billion within the within the first three months of this year.

Meanwhile, the government has increased its borrowings to nearly Rs. 70 billion during the first three months of this year through the issue of Sri Lanka Development Bonds.

Meanwhile, Finance Minister Ravi Karunanayake said that he would seek approval of Parliament to increase the loans that could be raised through the issue of Treasury Bonds by Rs. 400 billion, from the Rs. 850 billion to Rs. 1,250 billion.

Since the government loans through the issue of Treasury Bonds has reached nearly Rs. 829 billion, it has already neared the Rs. 850 billion mark.

However, the government expects to increase its borrowings through the issue of Treasury Bills since it needs the finances to meet its expenditure.

Meanwhile, analysts point out that the government’s monetary situation is under pressure since its plans to raise USD 1.5 billion through the issue of international bonds has been delayed. Financial analysts also point out that under these situations there are likelihoods of the interest rates rising in the near future.