ECONOMYNEXT – Sri Lanka tax payers will fork out 100 billion rupees to take over state bank loans of SriLankan Airlines with 25 billion rupees being injected in 2025, officials said, not counting the cost of restricting sovereign guaranteed bond.
The 100 billion rupees will be injected over 5 years as equity, Deputy Treasury Secretary A K Seneviratne told the parliament’s Committee on Public Finance.
The Treasury had guaranteed loans of 50.675 billion taken from Peoples Bank 44.656 billion rupees, documents released along with a budget for 2026 sshow.
There were around 210 million US dollars of forex loans and around 30 billion of rupee credits, which will be restructured before the end of 2025, and repaid over 5 years at a rate of around 20 billion in principal, Seneviratne said.
Some of the loans were in rupees charged at 16 percent, others were in US dollars at rates around 10 percent, Seneviratne said. The rupee loans would be converted to SLFR+1, the US dollar loans would be reduced to around 6 percent.
The day one loss of close to 13 billion rupees goes to cover the reduction in interest rates.
The restructuring was the result of a year long negotiations, amid central bank rules to ensure that banks remained solvent, Damitha Rathnayake, Additional Director General, Treasury Operations said.
Similar procedures were followed in the case of energy utility loans, Seneviratne said.
A supplementary estimated will be presented to parliament for some extra funds.
In 2025, a payment of around 25 billion rupees will be made to state banks to cover the ‘day one loss’ on interest rate reduction, interest for 2025 and around another 10 billion rupees for capital repayments.
The loans are restructured effective April 2026, he said.
“A lot of the public money is going to SriLankan, every year, it is in the tens of billions,” COPF Chairman Harsha de Silva said. “It is like a black hole.”
For the last eight months, SriLankan has no chief executive, he said.
SriLankan in the past has had similar volumes of capital injections, in the last occasion through rupee Treasury bonds which were sold in the market to raise cash.
In 2011, a 500 million dollar equivalent injection was approved, though not all the money was injected.
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At the time the rupee was below 120 to the US dollar.
The central bank through inflationary open market operations and non-credit intermediate regime (flexible exchange rate) has since depreciated the rupee to 308 to the US dollar.
Dollar loans then become bloated, pushing up losses of agencies with dollar loans.
In Sri Lanka a large volume of so-called capital expenditure in the past has been to inject capital to loss making state enterprises or others which can easily raise capital under private ownership.
There is over 200 million dollars made up of a 175 million dollars of principle sovereign guaranteed bond sold by SriLankan to foreign investors, and interest arrears for to be paid.
A preliminary deal had been reached to restructure the bond and interest with a 15 percent hair cut. (Colombo/Nov21/2025)