Sri Lanka ‘off-budget’ energy subsidies end up in national debt

Mar 20, 2011 (LBO) – Several years of accumulated ‘off-budget’ energy subsidies have now come home to roost in the Sri Lanka’s national debt, laying bare a tangled web of state energy price manipulation and budgeting. Sri Lanka’s Treasury, the agency that collects taxes from the people and also issues debt against future taxes collectable from the people, has given Treasury bonds to Ceylon Petroleum Corporation (CPC), to cover debts owed from a power utility.

Sri Lanka’s rulers have made energy utilities run losses, covered them with debt to state banks, to each other, or funded them with straight Treasury subsidies paid with taxes charged from other goods or printed money causing high inflation.

State businesses are used by rulers to dish out off-budget subsidies. State banks are frequently used to give low interest rate loans to state workers and other favourites.

The so-called ‘circular debt’ within energy utilities are now being unraveled under an International Monetary Fund program to clean up Sri Lanka’s fiscal tangles and high deficits.

The Sunday Times newspaper said the CPC had been given Treasury bonds, a debt instrument, to cover debts from Ceylon Electricity Board (CEB), a state power