Sri Lanka state firms to repay debt, but Treasury guarantees up

Nov 27, 2013 (LBO) – Sri Lanka’s state energy firms are repaying debt to banks with returning profits, but off-budget bank borrowings under Treasury guarantees are continuing to climb, finance ministry data showed. Loss-making state enterprises that borrow for consumption spending using savings of private citizens have been a key reason for lower domestic investments and savings in Sri Lanka despite having a high private savings rate.

A finance ministry report said state enterprises have repaid 15 billion rupees in outstanding debt, during the first nine months of 2013.

State enterprises are expected to repay about 52 billion rupees to the banking system in 2013 which the Treasury said will help reduce “market interest rates and higher lending to the private sector.”

Ceylon Petroleum Corporation which had borrowings of 203 billion rupees by September (down from 255 billion rupees in May) is expected to reduce the loans to 190 billion rupees by year end.

Ceylon Electricity Board which had borrowings of 51.6 billion rupees by September is expected to reduce them to 29.2 billion rupees by the year end.

However the Treasury had issued new guarantees for other agencies such as the Road Developme