The Sri Lankan government has appointed top private sector professionals, Ananda Atukorala and Suresh Kumar Shah to oversee the restructuring of Sri Lanka’s State-Owned Enterprises (SOEs), a government spokesperson told Finance Today.

Ananda Atukorala, a renowned banking sector professional, has been appointed to lead the Government’s newly formed Public Private Partnership (PPP) Unit, while Suresh Kumar Shah, the founding CEO of Lion Brewery, the current Chairman of the Ceylon Tobacco Company PLC (CTC), and a veteran chartered accountant, has been appointed to head the SOE restructuring unit.

According to the spokesman, the relevant appointments were made last week, and final negotiations regarding the assignment of functions to the relevant new institutions and the recruitment of new employees are currently taking place.

The newly launched PPP unit provides assistance in formulating regulations, creating privatisation frameworks, and preparing government assets and services identified for privatisation to ensure quality outcomes. Unit head  Atukorala was the Chairman of National Development Bank PLC (NDB) from August 2016 until the date of retirement in April 2019. He possesses extensive experience in banking extending over 40 years.

President Ranil Wickremesinghe stated in Parliament while presenting the Interim Budget 2022 that the government has decided to establish a SOE Restructuring Unit with a Rs 200 million budget allocation to facilitate with the restructuring of state-owned firms.

Some SOEs have been losing money for a long time due to structural issues, the President said, adding that the Treasury cannot continue to fund these entities and that a mechanism to make them more effective must be found.

The reform of inefficient SOEs is also an essential requirement under the recent staff-level agreement reached by Sri Lanka with the International Monetary Fund (IMF). It recommends that the Ceylon Electricity Board, Ceylon Petroleum Corporation, and Sri Lankan Airlines, which have a significant influence on the Government’s budget, be restructured immediately.

At the same time, the Government recently agreed to offer 20% of Bank of Ceylon and People’s Bank stake to employees and depositors. It is done to strengthen their capital base.

The Government is also considering divesting its other  key strategic and non-strategic assets to
fulfil its short to medium term ‘bridge finance’ needs, as friendly nations are unable to fulfill our future ‘bridge finance’ requirements.The Government was planning to raise at least three billion dollars through this initial divesting process.

“We have already lined up at least 10 state enterprises for this initial divesting process,” a government spokesman asserted.

Speaking to Finance Today, he also said, “By the end of this year, there is a 50:50 probability of getting the IMF executive board approval of our economic adjustment programme”.

Unlike on earlier occasions, this time Sri Lanka seeking the IMF balance of payment (BoP) support with a highly unsustainable debt status quo.

Therefore, in order to make our debt sustainable, firstly the country has 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.

As a result, Sri Lanka will deliver a presentation to its foreign creditors on Friday, outlining the entire scope of its economic difficulties as well as preparations for debt restructuring and a multi-billion dollar IMF bailout.

In a statement issued through the law firm Clifford Chance, the Ministry of Finance stated that an online call on September 23 would be available to all of its foreign creditors and would be “an interactive session” in which participants may ask questions.

Apart from that, the country has to undergo a rapid economic reform process under very adverse economic conditions 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 via PPP arrangements as per the foreign currency requirements of the country.

By Ishara Gamage