ECONOMYNEXT – Sri Lanka’s state-run SriLankan Airlines has lost 163.5 billion rupees in 2022, mostly on foreign exchange losses, its accounts shows, as the rupee ‘flexible exchange rate’ collapsed.
SriLankan revenues went up to 134 billion rupees in the year to March 2022, from 50.9 billion a year earlier as passenger traffic revived and the airline also boosted its cargo operations and the rupee also fell from 200 to 360 to the US dollar.
Passenger revenues increased to 77.9 billion rupees from 16.3 billion and cargo revenues went up to 43.9 billion rupees from 27.3 billion rupees.
Air terminal operations in Colombo brought the airline 9.038 billion rupees, up from 4.7 billion rupees a year earlier.
SriLankan posted an operating profit of 1.69 billion rupees before finances costs and exchange losses.
Finance costs including on legacy loans taken to cover past losses were 22.9 billion rupees.
Forex losses of 34.7 billion rupees and 107.8 billion was reported on multiple liabilities, taking the net group loss to 163.5 billion rupees.
Sri Lanka’s central bank operates an ad hoc peg arrangement called a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.
The arrangement leads to forex shortages currency collapses as aggressive open market operations, through various tools, are deployed to suppress market interest rates as domestic credit recovers.
From March the rupee as appreciated following a contraction in domestic credit and deflationary open market operations, which should led to forex profits, if the liabilities are still in the books of SriLankan.
Several state agencies that had dollar liabilities, private companies as well as the central bank itself had lost money due to ‘data driven’ flexible exchange rate/flexible inflation targeting regime.
Similar regimes are followed in other countries monetary instability, some of which end in default.
SriLankan said costs were contained with leases and other contracts being re-negotiated and yield were boosted and business won especially in cargo.
SriLankan is one of several state agencies listed to be privatized int the next 12 months. (Colombo/May14/2023)