The privatization of Government-owned enterprises, whether loss-making or not, depends on the country’s capability to service debt, Transport, Highways and Mass Media Minister Dr. Bandula Gunawardena said.
“Some have asked whether we are trying to sell profit-making institutions. Hardly any investor comes to buy loss-making entities. The Government will have to renounce the ownership of some Government assets in a manner that the country can benefit, despite the fact that they are making profits, in order to get out of the debt crisis. A specialized committee will decide on the public assets to be renounced,” he remarked.
“When a person is in debt and creditors have gone to the Court, he cannot choose to keep his properties, just because they make profits, without repaying the debt. Today, the country has fallen to that level. If we do not take action to get the country out of that situation, international ramifications will be adverse for the country, despite who is in the Government,” he noted.
He was addressing a press conference at the Government Information Department yesterday along with Prof. Harendra Kariyawasam and Prof. Shirantha Heenkenda of Sri Jayewardenepura University to brief on receiving the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) and future economic affairs of the country.
“The highest number of public assets were privatized in the period of former President Chandrika Bandaranaike Kumaratunga, however, the problem was that the Government used up that money to finance the budget, in other words to pay for regular expenses. Therefore, a public opinion has been created against the privatization. However, today we have no other alternative,” he commented. The Minister, citing the telecommunication sector as an example, pointed out that there have been instances where the efficiency of the services notably increased following privatization. Observing that the country’s total foreign debt obligation exceeds USD 50 billion, the Minister reminded that the Colombo Port City investment (USD 1.4 billion) and the part divestment of the Hambantota Port (USD 1.4 billion), collectively brought only USD 2.8 billion in to the country, adding that this shows the extent of the country’s debt burden.
He noted that the estimated Government expenditure for the month of March is Rs.196 billion whereas the estimated revenue is Rs.173 billion. He added that the specialty of the EFF approved by the IMF recently is that it permits the use of a share of that money for budget financing as the country has no other means to meet its expenditure. The Minister underlined that all strata of people would have to make some sacrifices to get the country out of its current debt crisis. “The Government had to take some uneasy and unpopular decisions to be eligible to receive the IMF credit facility, such as introducing cost-reflective price formula for oil, electricity and domestic LP Gas etc. and amending the tax policy. The President has prevented the country from becoming another Lebanon, Zimbabwe or Sudan, and the rest is now with the people,” he said.
Responding to a question by a journalist, the Minister said that relaxing import restrictions would not happen overnight, but that it would be done carefully and gradually by the Treasury giving priority for essential items including medicines, and industrial machines and input. Responding to another question on restructuring local debt, the Minister said that the Central Bank would make an explanation in the future.
Former Head of Sri Jayewardenepura University, Faculty of Management and Commerce Prof. Harendra Kariyawasam noted that the international confidence that comes together with the IMF programme is what matters the most than its USD 2.9 billion Extended Fund Facility (EFF).“No other country or organisation comes to our help without the IMF intervention. This is the last chance we get to attain debt sustainability. That, however, will be a painful process,” he commented.
The academic pointed out that the public institutions should, at the minimum, be able to cover their own expenses without depending on the Treasury. “Despite providing a public service, if they are dependent on the taxpayers’ money for survival that means they are a burden on the country,” he opined.
Observing that the country needs to increase its export income, Prof. Kariyawasam highlighted the importance of strengthening the prevailing laws to prevent exporters from holding their export income in overseas destinations.
Dean of the Sri Jayewardenepura University Humanities and Social Sciences Faculty Prof Shirantha Heenkenda said that the aim of the country with the IMF Programme that extends to 2027 should be able to function without depending on further loans after that.
“The advent of the IMF Programme is like the arrival of a teacher for a rudderless classroom. We have approached the IMF 16 times already, but this 17th time is different and the entire IMF package has to be implemented this time to bring in the necessary structural reforms to stabilize the economy, increase access to the international markets, improve the fiscal discipline and to enhance the economic growth. Political stability is needed to do them,” he explained.
He pointed out that shrinking the size of the Government is necessary during this period to curtail its expenditure, and the Government has to detach itself from doing business as much as possible. Under the IMF Programme, he said the target is to cover the external financial gap, which is about USD 25.2 billion, through the IMF EFF (12 percent), multilateral funding agencies like the World Bank and Asian Development Bank (15 percent), debt moratorium (11 percent), relief obtained from debt restructuring (56 percent) and the rest from sovereign bonds by entering the international financial market by 2027.
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