SRI LANKA EYING DIVESTITURE OF KEY STATE ASSETS

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The Government of Sri Lanka (GoSL) is considering divesting its key strategic and non-strategic assets to fulfill its short to medium term ‘bridge finance’ needs, as friendly nations are unable to fulfill our future ‘bridge finance’ requirements, a top government official told Finance Today.

Referring to Finance Today’s Tuesday (16) news article titled ‘Sri Lanka struggles to tap ‘Bridge financing’ officials said GoSL was planning to raise at least 3 billion dollars through this initial divesting process.

“We have already lined up at least 10 state enterprises for this initial divesting process, but has not yet been finalised,’ he asserted.

Speaking to Finance Today, he also said, “By the end of this year, there is a 50:50 probability of getting the International Monetary Fund (IMF) executive board approval of our economic adjustment programme. Unlike on earlier occasions, this time we are seeking the IMF balance of payment (BoP) support with a highly unsustainable debt status quo. Therefore, in order to make our debt sustainable, firstly we have to launch a successful debt restructuring programme. It will sometimes be a very complex and time consuming process as the country must reach a broad agreement with all creditors. Apart from that, the country has to undergo a rapid economic reform process to reduce the budget deficit and obtain the current account surplus of the BoP. These proposed reforms have not happened in this country in recent years. Therefore, getting public approval for the ongoing economic reform process might be a somewhat complicated and unpopular process”, he added.

Due to this complex scenario, he believes that it may take longer than the expected period to reach the final agreement with the IMF. Therefore, until such agreement with the IMF is reached, the Government has now focused on selling shares owned by the Government in several state enterprises to meet the ‘bridge finance’ requirements of the country.

He also stated that the Government’s attention has been focused on handing over the Government’s ownership of several sectors such as hotels, insurance, hospitals, telecommunications services, port services, power and energy sectors, airlines, state and private banks etc. in whole or in part to foreign investors as per the foreign currency requirements of the country.

‘Now the initial focus is on divesting the government stakes in the Grand Hyatt Hotel Colombo, Colombo Hilton and Grant Oriental Hotel. Earlier, the Government’s priority was privatization of the debt-ridden loss- making SriLankan Airlines and its subsidiaries. So far, the Government has not come up with a specific plan regarding the steps to be taken” the official said.

Top diplomatic sources told Finance Today that Sri Lanka will face severe constraints to reach the much-needed further ‘Bridge financing’ agreement with China, India and Japan in the future due to recent diplomatic issues hampering the political, social and economic status of the country.

By Ishara Gamage