89 loss-making SOEs become public liabilities
Governance and transparency are to be strengthened in 422 State Owned Enterprises (SOEs) as most of these institutions are running at a loss despite this sector’s contribution to GDP being 33 per cent last year.
Out of the 422 SOEs, 54 SOEs have been identified as strategically important State Owned Businesses Enterprises (SOBEs) that plays a catalytic role in transforming the country’s economy to a high growth trajectory, a recent progress review report revealed.
At present, 287 SOEs are being monitored by the Department of Public Enterprises (PED) and the remaining SOEs come under the purview of the Department of National Budget (NBD).
According to the official data, 89 public enterprises had shown a deficit totalling Rs. 57,158 million in their financial results in the year 2017/ 2018.
The Ceylon Electricity Board, Sri Lanka Rupavahini Corporation, Sri Jayawardanapura General Hospital, and 12 universities were with considerable financial deficits, the report highlighted.
As compared with the financial results, 109 public enterprises were able to reduce their financial deficits during the year 2017/2018. In addition, 167 institutions had recorded the financial surplus of Rs. 453,936 during the year under review.
The financial surplus of the Land Reform Commission and Tourism Promotion Bureau as compared with the previous year had shown an improvement.
The financial results of the National Gem and Jewellery Authority, Sri Lanka Institute of Development Administration and Export Development Board had deteriorated as compared with the preceding year, progress review report disclosed.
Meanwhile Sri Lanka’s Ministries and state institutions were in a bank borrowing spree increasing liabilities while posing contingent risk to government balance sheets, official financial statistics showed.
Liabilities of ministries, state institutions and SOEs are primarily driven by state guarantees, and the government that provides a larger quantity of such support also ends up correspondingly more vulnerable.
Government guarantees have increased substantially in Sri Lanka and such guarantees play a crucial role in lowering cost of financing for SOEs, allowing for greater returns on investment. But they are a form of support that gives rise to explicit contingent liabilities.
According to Finance Ministry sources, the value of the guarantees and letters of concession issued by the Treasury to banks for the loans obtained by public institutions and enterprises was a staggering Rs. 652 billion.
The Treasury pays back the loans amounting to Rs. 185 billion for around 100 bank guarantees provided to the ministries and departments, the report highlighted.
The Ministry of Defense and Urban Development has provided two bank guarantees for the loan obtained by the Sri Lanka Land Reclamation and Development Corporation, 90 bank guarantees provided for the loan obtained by the Road Development Authority, and four bank guarantees provided for the loan obtained by the National Water Supply and Drainage Board, the report said.