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CPC loan restructuring: Govt. to absorb losses of two state banks
View(s):The government is making provisions to absorb the losses of two state banks due to the restructuring of loans given to the Ceylon Petroleum Corporation.
Accordingly, the government is seeking parliamentary approval for a supplementary estimate of Rs 219.4 billion, of which Rs 130 billion is to be financed as compensation for any loss that would be incurred by the two state banks due to the restructuring of the CPC loans.
The largest allocation in the supplementary estimate comes in the wake of the restructuring of the loans that are transferred to the government, according to a note by the Treasury. The supplementary estimate was submitted to Parliament on Thursday (5) and is scheduled to be taken up next week
The new funding allocation is in addition to the Rs 450 billion that was already approved by Parliament for the 2024 budget as capital expenditure to cover compensation for the adverse impact of government debt restructuring on bank balance sheets.
During talks, the state banks indicated a strong preference to receive immediate possible loss to be identified within the banks’ financial statement on restricting CPC loans and absorbed to the government balance sheet as an interest payment in advance; the note explained the rationale behind the massive amount of allocation from the estimates. “Such a provision needs to be classified as a recurrent expenditure as opposed to capital expenditure,” it said.
The estimates also include grant-related expenditure (Rs 30 billion), senior citizen subsidy interest rates, and pension allocation (Rs 34 billion) and Rs 18 billion under the category of unforeseen expenditure, which includes expenditure for the school meals programme and unrealised losses in the government books due to fluctuations in the exchange rates.
A Vote on Account (VOA) amounting to Rs 1402 billion to allocate funds for government expenditure for the first four months of next year was approved without a vote on Friday.
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