The Government is holding back on restructuring of the hugely, loss-making Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board (CEB) as the country’s financial situation is seen improving, the International Monetary Fund (IMF) has been informed.
In both cases, the losses – though no figures are immediately available - have accumulated due to billions of rupees owed to the two state institutions by other big, government spenders, according to economists.
On Thursday, the IMF announced that it disbursed approximately $216.6 million at end of the sixth review under the Stand-by Arrangement (SBA). With this disbursement, a total of $1.5 billion has been received thus far by Sri Lanka under the SBA facility that was approved in July 2009.
In a January 17 letter to the IMF jointly signed by the Deputy Finance Minister Gitanjana Gunawardena and Central Bank Governor Ajith Nivard Cabraal on economic situation, the Government said the macroeconomic environment continues to be strong. Output growth has increased, inflation remains at a single digit despite pressure on food prices, interest rates have stabilized and private-sector credit growth has picked up.
“While the target on net international reserves was likely to be missed, the deviation was explained by a higher-than-anticipated ‘pay-down’ of certain public sector foreign exchange liabilities. On this basis we request a waiver of non observance for this performance criterion,” it said.
The Board of Investment is being re-positioned to focus on the identification of potential foreign investors and facilitating their activities, the IMF was told
The country’s foreign reserves have gone up to $6.8 billion which is equal 6.2 months worth of imports.
The letter said that in line with the budget, tax concessions have been reduced for foreign investments. “Flexibility would be retained under our Strategic Investment Law to offer concessions to strategic investment projects but all projects will be subject to Nation Building Tax and Economic Service Charge,” it added.
At a press conference on Thursday, IMF’s Sri Lanka Representative Dr Koshy Mathai cautioned against not implementing budget targets.
The letter to the IMF said that while the polices set out in this ‘the Letter of Intent’ are adequate to achieve the stated objectives, the government said it was prepared to take additional measures as appropriate to ensure achievement of its objectives.