Sri Lanka fiscal cash crunch hits medical suppliers

ECONOMYNEXT – Sri Lanka’s state hospitals has no medicine shortage but rising payment arrears is making it difficult for some pharmaceuticals companies to keep supplying the state sector, Health Minister Pavithra Wanniarachchi has said.

Sri Lanka’s government owes 25.7 billion rupees of arrears to pharmaceutical suppliers.

She put the blame on the last administration.

“The previous government has failed to pay for the medicine which was brought down from pharmaceutical companies, leaving them in difficulties,” she told reporters in Colombo.

“Owing to this, pharmaceutical supplies will be delayed in the future if the bills are not paid.

“We are paying for the previous governments inefficiencies.”

Analysts say most administrations tend to run payment arrears in December in a bid to show a lower budget deficit and settle them in January.

Sri Lanka’s new administration, which came to power in November slashed several taxes in a bid to ‘stimulate’ the economy, which was hit by an output shock after the currency collapsed in 2018.

Analysts have raised concerns about the tax cuts, especially a cut in value added tax from 15 to 8 percent.

The Finance Ministry has sought to raise the debt limit by 367 billion rupees for the first four months of 2020, amending a vote-on-account

Minister Wanniarachchi said the State Pharmaceutical Corporation also owned suppliers, but one company had had their bills promptly settled through a credit facility from a state bank, which was guaranteed by the state. (Colombo/Feb07/2020)