Sri Lanka President allows imports of electrical bikes amid soft-peg crisis

ECONOMYNEXT- Sri Lanka may have to shut loss making state enterprises many of which are overstaffed and will have to cut down staff to reduce the burden on the public amid a severe economic crisis, cabinet spokesman Minister Bandula Gunewardena said.

“In order to come out this crisis we need to increase our income. Restructuring will have to be done,” Minister Gunewardena told reporters Tuesday.

“We may have to shut down some losses making state enterprises or take other action.”

Gunawardane said last year the state tax revenue was 1,298 billion rupees but 1,115 billion had been spent on for salaries and pensions.

“We only had 153 billion rupees for all other things,” Gunawardena said.  “For debt repayments we need more than 1000 billion rupees. Who ever come to the government, the income does not satisfy the main two needs of the country which is salary and debt repayments.”

Debt repayment is not a budget item per se, but is rolled over as long as the central bank does not print money to keep interest rates down.

Gunewardena who is minister of mass media said agencies under his ministry were also overstaffed and faced financial problems.

State media corporations are being maintained with great difficulty and Treasury supplements from taxes on the people to pay salaries and wages of these institutes was no longer possible due to current currency crisis.

“Therefore I have advised all state owned media corporations to try and earn money to pay the salaries of their employees,” Gunawardane said.

“I have talk to their Boards of directors. If there are any assets that can be sold or removed and be used to pay compensation for these excess employees under a voluntary retirement system, that was is a way to maintain the organizations going forward.”

A formula already existed for voluntary retirement schemes (VRS).

“We have no intention of suspending anyone’s services without giving a compensation. There is a formula for that,” Gunawadane said.

“Even earlier these suspensions have been done according to that formula. In state owned media entities retirements were done according to this formula before this as well,”

But in the past VRS’s have been followed by new hiring by the next government.

However Minister said, due to refilling of those vacancies when government and ministers changes has resulted continuous loss for these entities.

“This time that cannot be done,” Gunewardene said. “If we retire excess employees paying them a compensation, and refill them with my people that weight will again be put on the general public,”

“It must not happen like that.”

In addition to SOEs Sri Lanka is also trying to cut the central government deficit under three-year framework with the deficit in 2023 expected to brought down to 6.8 percent of gross domestic product from 9.9 percent this year.

Sri Lanka is trying to cut state spending after running large deficits in the wake of three currency crises triggered by output gap targeting by economists initially by printing money but from 2019 also tax cuts.

In 2022 April Sri Lanka defaulted after borrowing heavily in bond markets and running out of reserves.

Sri Lanka is now trying to re-structure debt and is in talk with the International Monetary Fund for a bailout. (Colombo/Aug24/2022)


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