Cash Crunch

The government’s overdue subsidy payments for fuel and flour had snowballed to a massive Rs. 15 billion in addition to the Rs. 27 billion in short term debt that’s crippling the CEB. The government’s overdue subsidy payments for fuel and flour had snowballed to a massive Rs. 15 billion in addition to the Rs. 27 billion in short term debt that’s crippling the CEB. Finance Ministry sources say government was forced to cut subsidies on flour and water last month due to mounting overdue payments that could force price increases for fuel and electricity soon.

Government owes Ceylon Petroleum Corporation over Rs. 6.5 billion while Lanka IOC is owed Rs. 4.4 billion by end last month.

Monopoly flour miller Prima is owed another Rs. 4 billion.

Government last paid subsidy payments to Lanka IOC and Prima over a year ago in January 2004 but has promised to pay the outstanding amounts, although no time frame has been agreed.

Treasury is looking for program loan support from power sector restructuring and loan payment deferments to help tide over cash crunch.

Overdue subsidy payments have been accumulating for over a year, since the previous UNF government started subsidising fuel