Sri Lanka’s loss making SOEs slashed, but 50 in the red: Fin Min

ECONOMYNEXT – Sri Lanka’s new administration has reduced losses at state-owned enterprises and statutory agencies, but a quarter of them are still making losses, Finance Minister Ravi Karunanayake said.

Sri Lanka has 403 state entities and around 20 subsidiaries, of which around 200 were making losses, but the current administration had reduced it to about 50, Karunanayake said, after signing ‘Statements of Corporate Intent’ with the largest five SOEs.

Sri Lanka’s state entities include corporations, banks, academic institutions and publicly traded firms in which the state owns large stakes. 

Finance Ministry data showed that around 50 larger SOEs monitored by the public enterprises department of the finance ministry had increased profits after deducting losses from Rs42.2 billion in 2014 to Rs64.9 billion in 2016.

In the first eight months of 2017, profits rose to Rs123.6 billion, with Rs50 billion coming from Ceylon Petroleum Corporation, with low oil prices. Oil prices, however, have since risen.

The largest losses that de-stabilize the country are usually made at Ceylon Petroleum Corporation and Ceylon Electricity Board, which do not market price energy due to political pressure.

Karunanayake said the Statements of Corporate Intent, which were similar corporate planning exercises carried out at private firms will be extended to other SOEs in the future.

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Performance can be measured against the SCI’s set targets and goals.

Analysts say energy subsidies involving the ‘government bearing the burden’ is perhaps the greatest economic fraud perpetrated on the people by the rulers.

Sri Lanka’s rulers subsidise petroleum and electricity with bank credit, and the Central Bank then prints money to keep interest rates down, leading to balance of payments crises and currency collapses, which pushes up not only energy prices but also food.

After the currency collapses, energy prices have to be hiked (in rupee terms) to levels higher than if prices were raised under a formula.

Per person consumption of energy rises with income with the rich consuming much more energy than the poor. (Colombo/Mar15/2017)