Sri Lanka’s five largest State Owned Enterprises (SOEs) – Ceylon Petroleum Corporation (CPC), Ceylon Electricity Board (CEB) National Water Supply and Drainage Board, Airport and Aviation Services Ltd and the Sri Lanka Ports Authority are to undergo management restructuring soon, official sources disclosed.
A comprehensive strategy for SOE reforms and a more rules-based approach to financial management is now being developed by the Finance Ministry with the technical assistance of the International Monetary Fund (IMF).
The government is to implement these reforms to transform losses at these SOEs to more efficient units and put them on a path towards self-sufficiency, in line with IMF conditions under the ongoing US$1.5 billion Extended Fund Facility.
The aim is to enhance oversight and financial discipline of these entities, manage and operate as efficient commercial enterprises, based on prudent commercial principles, ensuring adequate returns equal to or more than the comparable commercial enterprises in the private sector, Finance Ministry sources said.
It encompasses the SOE’s mission, high level objectives, and multi-year corporate plan; capital expenditure and financing plans; and explicit financial and non-financial targets. They also include description and cost of non-commercial obligations.
The ministry is also looking at strengthening the legal framework for the governance and oversight of SOEs, including through establishment of financial regulations for SOEs on governance, accountability, and funds management.
Sri Lanka currently has 255 public enterprises representing a substantial share of the nation’s economic activity, Treasury data revealed.
These loss-making SOEs continue to incur losses as a result of lack of good governance, low productivity of employees, poor financial management, weak internal controls and structural deficiencies, Treasury sources disclosed.
With technical assistance from the IMF, the Finance Ministry identified outstanding financial obligations of the government and SOEs totaling Rs. 1.36 trillion in end-2015.
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.
|IMF staff team in Sri Lanka
|An IMF staff team headed by Jaewoo Lee, Deputy Division Chief of the IMF’s Asia and Pacific Department, is now in Sri Lanka for constructive discussions with the authorities including top officials of the Central Bank on the third review of the Extended Fund Facility (EFF) arrangement.The IMF team is currently assessing the country’s progress on the economic reform programme supported by a 3-year EFF, and the prior action by the Sri Lankan authorities, official sources said.
They will also monitor macroeconomic and financial conditions; and measures taken to achieve programme targets on international reserves. The team will leave the island after completing the third review of Sri Lanka’s economic performance under the EFF.