The government will allocate Rs. 200 million in the interim budget for this year to set up a ‘State-Owned Enterprise Restructuring Unit” to restructure government owned business entities.
The pledge was made when President Ranil Wickremesinghe presented the interim budget for the rest of the year in parliament today.
Wickremesinghe said the management of state-owned enterprises (SOEs) is a critical area of reform for the government which is struggling to revive the economy.
The major fiscal risks arise from a few key SOEs in particular SriLankan Airlines in the transport sector and the Ceylon Electricity Board and Ceylon Petroleum Corporation in the energy sector.
‘These entities face significant losses, negative equity (SLA/CPC), and large volumes of debt that is predominantly owed to the state banks, creating significant financial sector risk’, Wickremesinghe said. ‘Some of the state-owned enterprises have been making losses on a continuous basis due to issues of structural nature that existed for some time. As these losses cannot be met endlessly from the General Treasury, attention should be paid to find alternative mechanism make them effective’.
The government also plans to re-activate the Statement of Corporate Intent (SCI) process for key 50 SOEs, excluding CEB, CPC and Sri Lankan Airlines, as they are under different efforts to restructure, to closely monitor targets.
‘These difficult but necessary measures pertaining to SOEs will no doubt be challenging to address, but failing to do so would create catastrophic risks, particularly for financial sector stability, and will entail even higher taxation burdens on the public in the future’, Wicremesinghe added.
