Government Business Massive Loss -IMF

rupeeMassive losses at Sri Lanka’s state enterprises have a negative impact on people’s lives that are beyond accounting losses in the balance sheet, which hurts investment and jobs an International Monetary Fund official said.
Last year state-run Ceylon Petroleum Corporation and Ceylon Electricity Board lost more than 150 billion rupees.”It is not because we have some kind of undue concern for financial results,” IMF resident representative Koshy Mathai said.”Those losses are a real drag on the economy.”

The losses were now hidden in the balance sheets Bank of Ceylon and People’s Bank, but they ate up savings in the banking system taking away investible resources eventually costing jobs.

“It is easy to put those losses aside because don’t see them in the central government budget,” Mathai said.

“They are hidden somewhere on the balance sheets of Bank of Ceylon and People’s Bank. When those banks are forced to lend such huge amounts there is correspondingly less money that has to be lent to the rest of the economy.

“And interest rates for the whole economy go very high as businesses are seeing now.

“When those interest rates are high, growth goes down and jobs are lost. So this is not a choice between having a nice looking balance sheet for state enterprises and having price increases that difficult for the ordinary person.”

Other analysts have pointed out that when the Central Bank tries to control spiking market interest rates, the rupee falls and inflation goes up making life difficult for everyone who see basic food prices go up.Mathai said the IMF publicly and in discussions with authorities always backed efforts to market price energy though it was not involved in formulating recent proposals on a power tariff hike.

Meanwhile Mathai said automatic price changes to petroleum will allow the economy to adjust to international movements.

It will allow international price changes to be “passed on to the economy in a smooth way, rather than having large discrete jumps in prices that are made on a discretionary basis by the government,” he said.

But he said there were also structural issues in the energy utilities that were keeping prices high and simply passing on costs was not a long-term solution.

Other analysts have pointed out that the CEB has high cost generation, it procures independent power plants without tender ending up with unfavourable rates and it has not managed the daily yield curve well resulting in the need for additional capacity.

The CEB is now increasing being burdened with high cost renewable energy plants and it is losing the most lucrative domestic customers to solar through net metering, critics have said.

The CPC is heavily overstaffed and there have also been questions raised about procurement.(LBO)

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