Sri Lanka key SOEs with Rs1.2trn in debt form crisis reduction plans
ECONOMYNEXT – Sri Lanka’ six largest state enterprises which have 1.2 trillion in debt and have been a key trigger of economic crises in the country have submitted a three year corporate plans under an International Monetary Fund backed deal to keep the economy stable.
The International Monetary Fund identified six large state enterprises which collectively had 1.28 trillion in debt, as a key risk to the economy.
They were expected to submit statements of corporate intent (SCI) by December 2016, as a ‘structural benchmark’ by December. Sri Lanka has missed at least one quantitative performance criteria and several structural benchmarks including finding a partner for SriLankan Airlines.
The cabinet f minister have approved SCIs for Ceylon Petroleum Corporation, Ceylon Electricity Board, Water Board, ports and airport agencies, Minister Rajitha Senaratne said.
The CEB and CPC which sell energy at a loss and fund the losses with borrowings from the banking system (which are ultimately accommodated with printed money) has been the main trigger of balance of payments crises in 1999/2000, 2000/2009 and 2011/2012.
The CEB however has submitted a plan without considering a tariff revision.
Analysts say as a result, the CEB will remain a risk to the economy as oil prices rise. The government has also scrapped future coal plants and replaced them with diesel plant in the guise of dual-fuel plants that can burn liquefied natural gas, which critics say will push up costs further.
A 15 percent value added tax will also come for coal.
The CPC however expects to change prices with a 10 percent increase in fuel prices expected.
NSB is expected to raise tariffs and reduce leakages. The tax-payers through the Treasury will repay 75 percent of its loans. (Colombo/Mar02/2017)