Treasury Secretary Dr. P. B. Jayasundera yesterday outlined several challenges the economy was facing despite the significant macroeconomic gains made since the end of the 30-years long conflict in May 2009, calling on the government to adjust themselves from being mere politicians to custodians, paying serious attention to reforming state-owned enterprises which were draining public finances.

Releasing the 2011 Annual Report of the Ministry of Finance and Planning, in keeping with Fiscal Responsibility Act, Dr. Jayasundera said the Treasury had highlighted several challenges and issues for public debate.

`We have made significant macroeconomic gains since the end of the conflict, although the question could be asked whether it is enough. We have also presented the challenges and some of the issues being debated so that the public can engage with us and take the debate forward,` he said.

Out of 74 state-owned enterprises (SOEs) only 36 reported profits to contribute Rs. 34 billion to government coffers in 2011. `This is an increase of 10 percent over the previous year but underperforming in terms of potential,` the annual report pointed out.

Governance issues continue to plague the SOEs and this placing a heavy burden on the public, with the Treasury infusing Rs. 102 billion in 2010 and 2011 to keep these institutions afloat.

`It has been observed that chairmen and the boards of management of SOEs and other entities (229 government entities in all, including the 74 SOEs that run commercial activities) do not adequately contribute to the performance of the entity and remain ignorant of their responsibilities, despite the Treasury taking steps to keep boards aware of their responsibilities through either review meetings or the issuance of guidelines,` the report noted.

`Undermining good governance practices, some entities take important decisions specifically in the absence of Treasury representatives or not in proper consultation with the line ministry nor the Treasury. Despite circular instructions, in some instances board sub-committees, particularly the audit and the management committees which are useful in ensuring best practices in corporate governance are not functioning or have not been appointed. This has marked a clear deterioration of the internal control systems of SOEs,` it said.

The Island Financial Review asked Dr. Jayasundera yesterday what the Treasury was doing about this poor state of affairs.

`These officials should be removed and replaced by competent officials. The Treasury is not the appointing authority. It is up to the government to take this matter seriously. Policy makers need to put party politics aside and assume the role of custodian. These SOEs have the potential to reap good profits. We need officials who will put the interest of the country first,` he said.

He went on to say that the country has seen an increase in the cadre of doctors and nurses but non-communicable dieses were on the rise. `We were also shocked to learn that around 12,000 students failed all subjects at the GCE Ordinary Level Examinations despite an increase in the number of teachers,` Dr. Jayasundera said.

He forecasted a growth rate of 7 percent this year but said the drought situation was not taken into consideration, `hopefully the rains would come,` he said.

He also said the fiscal performance was on track to achieve a 6.2 percent of GDP budget deficit target by the end of this year.

`We will have to wait until the end-May data comes in from the banking sector to see whether recent policy measures have brought down credit demand.`