Finance Min. issues letters on outstanding dues to suppliers

• Letters can be used to obtain loans from commercial banks 
• Companies also instructed to open accounts to receive Govt. payments
• Funds to be disbursed in phases for all dues up to 31 March, covering 2019 and 2020 
• Dues estimated at over Rs. 350 b, construction among hardest hit

The Finance Ministry yesterday said it has commenced issuing letters to contractors and suppliers owed by the Government, so they can use the document to obtain loans from commercial banks.

Treasury Secretary S.R. Attygalle

 

Stepping up to implement a Cabinet decision that was taken on 6 June, the Finance Ministry said it will issue letters to Government suppliers, particularly construction companies that have long outstanding dues from development projects and were subsequently badly hit by the COVID-19 outbreak. The payments cover all outstanding dues, as at 31 March 2020, from the years 2019 and 2020. 

“The letters issued by the Finance Ministry giving details of what is owed by the Government can be accepted by commercial banks, and companies can use it to borrow funds to run their businesses,” the Finance Ministry said in a statement. 

The letter will be issued by the Treasury to the commercial bank nominated by the relevant contractor. The companies are also required to then open a bank account to receive funds that will be released by the Treasury in phases, the statement added. 

The Finance Ministry also assured that the Government was committed to paying all outstanding bills, and funds will be released to the relevant line Ministries and departments in due course to make payments to suppliers. 

Companies were also advised to open a bank account with the bank they generally do business with to facilitate the use of the payment letters as well.    

The Government in February sought to amend the earlier Vote on Account (VoA) to raise the borrowing ceiling to Rs. 1,088 billion, partly to pay an estimated Rs. 367 billion in overdue payments. However, the effort was subsequently abandoned after it became apparent that the Government would not be able to muster the required number of votes in Parliament. Since then, several sectors have appealed to the Government to settle overdue payments. 

One of the hardest-hit segments is construction, with much of the 3000-odd local companies struggling to continue operations after the curfew imposed to contain COVID-19. The Ceylon Institute of Builders (CIOB) along with other stakeholders have repeatedly appealed to the Government to fast-track payments, pointing out that as much as Rs. 400 billion in total outstanding payments were owed. 

Outstanding payments were for construction done on the “Nearest School Best School” project, provincial road construction done by the Road Development Authority (RDA) and Divisional Secretariats, construction of provincial schools, and building of highways.  

The Cabinet decision to issue letters listing out the dues by the Treasury was made as part of the Government’s efforts to limit COVID-19’s impact on the economy. As part of these efforts, the Central Bank last week said commercial banks had approved 22,306 loans amounting to Rs. 60.25 billion under the Saubagya COVID-19 renaissance facility, as of 10 July.

Just last week, approval was given for 2,066 new loans, amounting to nearly Rs. 7 billion. CBSL said the licensed banks have already disbursed Rs. 30.5 billion among 13,333 borrowers countrywide as of Thursday.  

The latest statement reflects a Rs. 7 billion increase in the approved amount from the previous disclosure by the Central Bank as of 2 July, under Phase 1 and 11 of the scheme. As of early July it was stated that CBSL had approved 20,240 loans worth Rs. 53.27 billion.