Sri Lanka Treasury guarantees fiscal risk increasing: World Bank

ECONOMYNEXT – The fiscal risk posed by Sri Lankan government Treasury guarantees to state-owned enterprises (SOEs), especially those without stable revenue streams, has increased, the World Bank has warned in its latest development update.

“Treasury guarantees primarily granted to SOEs and state agencies to borrow from domestic and foreign financial institutions also showed a significant increase in 2016 although the utilization remained relatively low,” it said.

Issued treasury guarantees increased as a share of GDP from 5.6 percent in 2015 to 7.1 in 2016 while the used guarantees also moved up from 3.7 to 4.4 percent of GDP during the same period.

“Moreover, the composition of guarantees has been changing over time, with the significance of guarantees given to institutions with stable revenue streams, such as Ceylon Petroleum Corporation (CPC) and Ceylon Electricity Board (CEB), declining from 90 percent in 2006 to 36 percent in 2016 while guarantees given to state establishments, primarily dependent on the state budget, are on the rise.”

Among others, these include Road Development Authority, General Sir John Kotelawala Defence University and Urban Development Authority.

“These agencies have no significant sources of revenue and the debt repayment will likely come from the Treasury in the future,” the World Bank said.

Other state bodies were National Water Supply and Drainage Board (NWSDB), SriLankan Airlines (SLA), and Airport and Aviation Company (A&A).
(COLOMBO, June 30, 2017)

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