The International Monetary Fund (IMF) has called on Sri Lanka to expedite its state-owned enterprise (SOE) reforms, stressing that progress is essential for stabilizing the economy. The push comes amid delays following the recent shift in government policy, which reversed the previous administration’s privatization plans.
Evan Papageorgiou, the IMF’s new Mission Chief for Sri Lanka, highlighted the need for quicker action, particularly concerning major state entities like SriLankan Airlines, the Ceylon Petroleum Corporation (CPC), and the Ceylon Electricity Board (CEB). These entities have long posted heavy losses, contributing significantly to the country’s fiscal crisis and its 2022 sovereign debt default.
“There is a way forward, and we want to see more progress,” Papageorgiou said during a virtual media briefing on Tuesday (April 29), held to discuss the Staff-Level Agreement on the Fourth Review under the IMF’s Extended Fund Facility (EFF) for Sri Lanka.
The previous administration under Ranil Wickremesinghe had advanced plans to reduce state involvement in certain commercial enterprises. However, the new government led by President Anura Kumara Dissanayake has halted such efforts, citing the party’s anti-privatization stance. The divestment process of SriLankan Airlines was paused, with the government pledging to introduce alternative reforms instead.
As part of its response, the Cabinet has appointed a committee to review a draft of the proposed “State Commercial Enterprises Management Bill,” aimed at insulating SOE boards from political interference and ensuring appointments of qualified professionals.
Despite the slowdown in divestment, Papageorgiou acknowledged some encouraging signs. “We understand that a strategic plan is being prepared to restore SriLankan Airlines’ operational viability and address legacy debt,” he said. The government has allocated Rs. 20 billion in the 2025 budget for the airline’s debt, and a financial advisor has been engaged to help restructure its international bonds.
Still, Papageorgiou emphasized the need to accelerate reform efforts. “These are all steps in the right direction, but they need to pick up pace,” he noted.
He stressed the importance of improving SOE transparency and financial management, pointing to ongoing IMF efforts to mandate timely publication of financial statements for the 52 largest SOEs. Additionally, he underscored the need to implement cost-recovery pricing and limit foreign currency borrowing by non-financial SOEs to avoid further fiscal risk.
“These reforms are crucial to reduce fiscal burdens on the state and ensure taxpayers are not left subsidizing inefficiencies,” Papageorgiou said. He added that SOEs must operate efficiently and transparently, free from corruption, and provide quality services to the public in a financially sustainable manner.
