Despite the oil price hike, the Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board (CEB) are set to lose Rs 100 billion this year, according UNP Parliamentarian and economist Harsha de Silva.
He told the Business Times that while a certain amount of funds would be made available by the state-owned banks to these two institutions, one of the two key questions to be answered would be on the serviceability of these facilities.
“Would the CPC and CEB be able to make good the repayment or will the Treasury be requested to intervene and settle the debts as in many an instance in the past,” he asked.
The other question is if the state banks are unable to provide the facilities, would the two institutions go to private banks for these high risk rated borrowings.
“In fact, only recently we witnessed how the CPC approached a 'state controlled private bank' for a huge facility on top of what they get from the two state banks. With the purchase of shares of commercial banks by the EPF Department of the Central Bank in complete contravention to its own investment regulations and against all accepted morals and ethics the government has been able to appoint many directors to the boards of what used to be private banks, now more aptly termed 'state controlled private banks',” he said.
In addition to directors, in the case of HNB, its chairperson and in the case of Commercial Bank, its deputy chairman was appointed by the state. It is common knowledge that a number of senior executives have also been replaced by 'state' appointments, he said. It is obvious that once these structures are set up the state can direct funding to entities it so desires. Loss-making state enterprises are already getting such banks to provide guarantees for their high risk borrowings elsewhere.
Dr de Silva said on top of all this, the Governor of the Central Bank recently increased the limits on how much commercial banks could borrow internationally to lend locally. It has now been revealed that certain banks are in the process of borrowing up to US$ 800 million which would then quite likely be re-lent to loss making and corrupt state enterprises. International repercussions of problems in servicing these loans would be just unimaginable, he said. |
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