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Key SOE debt hits Rs. 844.6 b: CB

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Outstanding debt of major public corporations, including the Ceylon Electricity Board (CEB), SriLankan Airlines and Ceylon Petroleum Corporation (CPC), increased to Rs. 844.6 billion in 2017 from Rs. 827.4 billion the previous year.  

The Central Bank Annual Report noted that domestic debt of public non-financial corporations to domestic commercial banks increased to Rs. 514.4 billion from Rs. 495.1 billion, accounting for 60.9% of the total outstanding debt of major non-financial corporations. The debt to GDP ratio of major public corporations, other than State banks, declined marginally to 6.4% from 6.9% last year.  

The Central Bank categorises several large public enterprises as non-financial corporations, including CEB, CPC, Ceylon Fertilizer Corporation, Road Development Authority (RDA) and Sri Lanka Ports Authority (SLPA). The outstanding debt is divided into domestic and foreign components. 

Highest among the enterprises owing domestic debt was CPC, which owed Rs. 177 billion in outstanding debt at the end of 2017. 

Other significant corporations with outstanding debt included RDA with Rs. 100 billion, SriLankan Airlines with Rs. 57.4 billion, and SLPA with Rs. 14.6 billion. CEB had Rs. 155.5 billion in foreign debt and Rs. 27 billion in domestic debt.

Despite comparatively slow domestic debt, SLPA also had Rs. 150.7 billion in debt, largely due to loan payments due for the Hambantota Port. Borrowings of smaller corporations also amounted to Rs. 88.8 billion.

“Meanwhile project-related foreign debt increased to Rs. 330.2 billion. The relative share of project-related foreign debt to total outstanding debt of major public non-financial corporations declined to 39.1% at end 2017 from 40.2% at end 2016,” the Annual Report said.  

In mid-2017, Moody’s Investors Service put Sri Lanka’s public enterprise debt at a whopping 14% of GDP and warned the Government of additional risks to its finances should such debt require any State support, which is likely to become the case as most cannot repay their debt and would need funding by the Treasury.   

The Government had earlier stated it was attempting to improve governance of State-Owned Enterprises (SOEs) and had mooted listing several enterprises and establishing a Temasek-like system for key corporations. Yet these measures failed to materialise.

The Government is currently attempting to introduce a pricing formula for fuel to reduce losses of CPC but talks have been caught in a deadlock between CPC and the Finance Ministry. Introducing pricing formulas for fuel and power are part of the $ 1.5 billion Extended Fund Facility (EFF) with the International Monetary Fund (IMF).

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