Sep 07, 2017

Govt. to improve financial condition of public enterprises Featured

Sri Lanka government is to improve financial condition of some of the 200 public enterprises representing a substantial share of the nation’s economic activity.

With technical assistance from the IMF, the Ministry of Policy Planning and Economic Development has identified outstanding obligations of the central government and SOEs totaling Rs 1.36 trillion in end-2015.

These included enhancing oversight and financial discipline and  statements of Corporate Intent (SCIs) were signed in March 2017 and published in April 2017 for the five largest SOEs (CPC, CEB, National Water Supply and Drainage Board, Airport and Aviation Services Limited, and Sri Lanka Ports Authority).

The SCIs encompass the SOE’s mission, high level objectives, and multiyear corporate plan; capital expenditure and financing plans; and explicit financial and non-financial targets.

They also include description and cost of non-commercial obligations (NCOs) such as utility subsidies to strengthen the transparency and fiscal accountability.

Government plans to publish NCOs in the annual budget for 2018 and 2019. Outstanding obligations of the central government, totaling Rs 58 billion were settled during 2016; and (ii) those of 4 SOEs (CPC, CEB, Sri Lankan Airlines, and the Sri Lanka Port Authority), totaling Rs 1.2 trillion.

Although some SOEs are profitable and performing well, collectively they represent a risk to public finances (either directly or through the state banks which fund the largest SOEs).

A comprehensive strategy for SOE reform and a more rules-based approach to financial management is being developed. In the near-term.

Government will also look at strengthening the legal framework for the governance and oversight of SOEs, including through establishment of coherent financial regulations for SOEs on governance, accountability, and funds management.