World News | Sri Lanka to Push Ahead with Restructuring of Loss-making State Enterprises

Colombo May 16 (PTI) Sri Lanka has approved the restructuring of the loss-making state enterprises to strengthen government finances and speed up economic recovery, Cabinet spokesman Bandula Gunawardana said on Tuesday, as part of the bailout deal signed with the IMF in March.

The International Monetary Fund (IMF) recently extended a nearly USD 3 billion bailout facility to debt-ridden Sri Lanka to help stabilise the country's economy after it was jolted by a devastating economic crisis last year.

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Cabinet Spokesman and Transport Minister Gunawardena told reporters that the Cabinet approved the policy to restructure public enterprises.

“The aim of the policy is to transform state enterprises so that they will not be a burden to the country, a burden to the budget and to make them market-oriented,” Gunawardana said.

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“It has been proved over a long time that most of these enterprises were running at huge losses causing a burden to the Treasury,” he said.

He said the decision to implement the restructuring policy resulted from the Cabinet's approval of setting up a state-owned enterprise restructuring unit (SRU) under the Ministry of Finance in September last year to divest the businesses that have been a burden on the economy.

The government had listed some 52 state enterprises, including the national carrier Srilankan Airlines, insurance and power utility enterprises run by the state, which need reforms under the Washington-based IMF's bailout package, the agreement for which was signed in March.

The development comes a day after the IMF expressed hope that the crisis-struck nation's debt restructuring process would be completed by September.

Commenting on the reforms envisaged under the IMF's extended fund facility of nearly USD 3 billion over 48 months, the global lender announced on Monday that revenue-based fiscal consolidation was a key pillar of the programme.

“Fiscal institutional reforms and cost recovery based energy pricing to ensure the state's ability to support all its essential expenditures”, is a key condition of the programme, Krishna Srinivasan, the IMF's director for Asia Pacific, said.

Srinivasan stressed that it was essential for Sri Lanka to continue the reform programme.

A team of the IMF is currently in the island country assessing the progress made since the agreement reached on March 20 for a nearly USD 3 billion bailout facility over four years.

According to official figures, Sri Lanka's total debt is USD 83.6 billion, of which foreign debt amounts to USD 42.6 billion and domestic debt amounts to USD 42 billion.

In April 2022, Sri Lanka declared its first-ever debt default, the worst economic crisis since its independence from Britain in 1948, triggered by forex shortages that sparked public protests.

Months-long street protests led to the ouster of the then-president Gotabaya Rajapaksa in mid-July. Rajapaksa had started the IMF negotiations after refusing to tap the global lender for support.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)