COLOMBO: Sri Lanka's new government suffered its first setback in parliament Tuesday when its proposal to raise the short-term state borrowing limit by over $3.0 billion was shot down by legislators.
The government of Prime Minister Ranil Wickremesinghe had asked the 225-member legislature to approve increasing the treasury bond limit by 400 billion rupees ($3.0 billion) to 1,250 billion rupees.
MPs voted 31 in favour and 52 against in what analysts said was a major embarrassment for the government.
Finance Minister Ravi Karunanayake played down the setback, saying the rejection of the resolution did not prevent the government tapping into bonds and raising money at rates higher than in the treasury bill market.
He said he had wanted to retire high cost bonds by issuing shorter term, lower interest treasury bonds with a maturity of one year or less.
"This has no impact to governments day-to-day businesses," Karunanayake told reporters at a hurriedly summoned press conference.
Deputy Economic Development Minister Harsha de Silva said the rejection would mean the state having to borrow at rates of 10 to 11 percent compared to the treasury bill rate of about 7.5 percent.
"This will be a bigger burden on our people," de Silva said.
The government came to power after Maithripala Sirisena won the backing of most of the opposition and defeated strongman President Mahinda Rajapakse, who had ruled the country for a decade.
Despite lacking a parliamentary majority, Sirisena appointed the then-opposition leader Wickremesinghe to form a minority government.
Tuesday's vote exposed its vulnerability.
Sirisena came to power promising to scrap the executive presidency and return the country to a parliamentary democracy.
In his election manifesto, he promised to dissolve parliament on April 23 and call a fresh parliamentary election after establishing democratic institutions to run the public service, the police, the elections department and the judiciary.
Higher education minister Rajiva Wijesinghe resigned last month, saying political reforms had not gone far enough.
The new government has drafted a constitutional provision to reduce some of the president's executive powers and a two-day debate is scheduled from Thursday.
If cleared by the Supreme Court, the constitutional amendment requires a two thirds majority which the government does not have on its own, unless the opposition agrees to support.
The opposition has been reluctant to support political reforms.
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