Month: December 2021

With the government’s current approach appearing to be failing in its ability to meet upcoming external debt servicing commitments, the Colombo-based policy think tank Advocata Institute urged the government to roll out a broad reform package targeting ‘strategically important’ State-Owned Enterprises (SOEs) as a way to regain confidence of the country’s external creditors, illustrating the determination to resolve the prolonged structural issues in the economy.

According to data presented by Advocata, the cumulative losses incurred by key SOEs were estimated at Rs.1.2 trillion during 2006-2020, while the total SOE debt reached to 9 percent of GDP in 2020.  The top five SOEs alone incurred an estimated Rs.384.48 million loss per day burdening both State coffers and ultimately the taxpayer.

“Sri Lanka lacks credibility in its approach to the creditor. In the current context, it’s not possible for us to increase revenue. Therefore, what we have to focus is on cutting expenses. This will send a strong message of responsibility and of commitment to anyone who has given us loans and they will say, ‘this is the country we should negotiate with, because they are serious about their economic problems’,” LIRNEasia Founding Chair and Advocata Institute Advisor Prof. Rohan Samarajiva said.

He was speaking at a press briefing organised by Advocata Institute titled ‘The Urgency of State Owned Enterprise Reforms’ in Colombo last Thursday.

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The 55 “Strategically Important” listed State-Owned Enterprises (SOE) snowballing losses from 2006 to 2020 is a staggering Rs. 1.2 trillion. Out of the 527 state-owned enterprises the Treasury has classified 55 as “Strategically Important” it was revealed at an Advocata Institute that organised an event on “The Urgency of State-Owned Enterprise Reforms” last week.

Sri Lanka’s State-Owned Enterprises have placed a significant burden on public finances. They are also a major source of inefficiency in the economy. “Therefore the present economic crisis, along with Sri Lanka’s current debt crisis, makes reforms on SOE’s a national priority to emerge from present economic challenges,” it was opined at the event.

Policy Analyst Advocata, K.D.D.B.Vimanga said that Ceylon Petroleum Corporation, Ceylon Electoral Board, SriLankan Airlines, and Sri Lanka Transport Board daily loss in the year 2019 per day was Rs. 384,479,189. Academic Chair Advocata Institute Dr Sarath Rajapatirana, said that the total productivity of SOE is less than 1% and very much less in countries like Vietnam and Korea.

LIRNEasia Founding Chair and Advocata Institute Advisor Prof. Rohan Samarajiva for the second time in succession (at an Advocate event) stressed that SriLankan Airlines should be privatised as it is making around Rs. 47 billion in losses per annum. “What is the rationality of using public funds collected through commodity taxes from persons who have never even gone near the airport to keep this airline,” he asked. He also pointed out that even India doesn’t own a national carrier as (Air India was returned to Tata after 68 years. After the Group paid INR 18,000 crore to acquire it from the government.)

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Amidst a whopping amount of losses national carrier SriLankan Airlines has been making for years, LIRNEasia Founding Chair and Advocata Institute Advisor Prof. Rohan Samarajiva questioned why Sri Lanka would need a national carrier when India, the neighbour, does not have one. 

During a press briefing organised by Advocata Institute on “The Urgency of State Owned Enterprise Reforms”, Prof. Samarajiva stated that SriLankan Airlines should be privatised to not only save public money, but to also improve the credibility of the country by showing the country’s creditors that Sri Lanka is genuinely committed to meeting its debt payments. 

Prof. Samarajiva pointed to the fact that Sri Lankan is hemorrhaging around Rs. 47 billion in losses per annum and questioned the rationality of using public funds collected through commodity taxes from a person who has never even gone near the airport. 

Explaining further, he stated that when the Government reduced taxes in 2019, rating agencies downgraded Sri Lanka as it gave the impression that the country has no genuine intention of meeting its payments immediately after the Covid-19 pandemic hit the country. Due to this situation, our debt situation has reached a critically dangerous state which requires us to restructure our debt, according to Prof. Samarajiva.

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