Home » US$ 1.7 billion in SOE debt owed to China entered Govt books

US$ 1.7 billion in SOE debt owed to China entered Govt books

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Cash strapped government is to restructure some of the profit-making state-owned enterprises while taking over responsibility for US $ 1.7 billion owed to China by State enterprises as it seeks to sell them off and restructure its foreign debt to secure an IMF bailout.

Fiscal stability through revenue consolidation typically remains a key ingredient in the IMF’s formula for economic recovery.

Hence, Budget 2023 did not contain any major revenue proposals, to the surprise of some, as speculation was rife that the government may introduce a wealth tax, which is part of the programme with the IMF.

The government expects to collect Rs.3130 billion as tax revenue in 2023, as opposed to Rs.1298 in 2021.

The restructuring of state-owned enterprises (SOEs) is also a key reform Sri Lanka has to undertake under a prospective IMF programme to get government fiscal house in order

At present, the government iis bearing the cost of 420 government institutions and enterprises. The annual loss of these major 52 SOEs is Rs.86 billion

President Ranil Wickremesinghe said $ 1.7 billion in loans taken from China’s Export-Import Bank by three key loss-making state-owned enterprises (SOE) – the electricity utility Ceylon Electricty Board (CEB ) , Port Authority, and Airport and Aviation Services – would be considered government debt.

Taking the loans off their books will strengthen their balance sheets, which could make them more attractive to buyers or outside investors.

He also, revealed the selling-off of five state-owned companies, including the national carrier SriLankan Airlines, Sri Lanka Telecom, Insurance Corportaion, Colombo Hilton Hotel and Water Edge Hotel – which have debts of more than $ 1 billion – to reduce the strain on the national budget 2023.

Proceeds from the “restructure” of the companies will be used to boost the country’s depleted foreign reserves, he said, without giving estimates.

The Government is in talks with the IMF as it seeks funding 2.9 billion to enable the island to recover from its worst-ever financial crisis.

Sri Lanka defaulted on its foreign debt in April and the IMF has said its borrowings must be “sustainable” to unlock any new external funding.

That will require its creditors to take a haircut on their loans, but China is its biggest lender and Beijing has given no indication it is willing to do so.The government revised its external debt figure down from $ 51 billion to $ 46 billion.

Just over $ 14 billion of that is bilateral debt owed to foreign governments, of which China holds 52%.

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