The Government has absorbed billions of dollars of borrowed money denominated in foreign currency by state enterprises following the standstill of external public debt servicing for an interim period pending an orderly and consensual restructuring process, a Finance Ministry report revealed. State-owned utilities and public sector services including energy, petroleum, water, transportation, etc have been [...]

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Govt. absorbs $3.86 bn SOEs debts

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The Government has absorbed billions of dollars of borrowed money denominated in foreign currency by state enterprises following the standstill of external public debt servicing for an interim period pending an orderly and consensual restructuring process, a Finance Ministry report revealed.

State-owned utilities and public sector services including energy, petroleum, water, transportation, etc have been provided to the public at below cost recovery prices for a long time.

The costs of these untargeted subsidies were borne by the state owned enterprises (SOEs,) resulting in large accumulated losses, which were mostly covered by transfers from the central government budget.

Non-cost reflective prices have been the major reason for the bleak financial performance and poor market orientation of the major SOEs in the country, the report highlighted.

When borrowings of SOEs were at unsustainably high levels, in the past, the government has been compelled to step in to relieve such debt burden using its revenue collection.

As part of the actions agreed under the IMF-EFF arrangement, the outstanding foreign currency debt of Rs. 884.1 billion (US$2,434.8 million) of the Ceylon Petroleum Corporation was absorbed into central government debt by end 2022.

In addition, the outstanding balance of eight loans amounting to Rs. 518.3 billion ($1,427.3 million), obtained from China’s Export-Import (EXIM) Bank and recorded under Sri Lanka Ports Authority, CEB, and Airport and Aviation Services (Pvt) Ltd were also absorbed into government debt by end 2022.

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