State Support

Mar 17, 2009 (LBO) – A Sri Lankan state-run bank that has lent money to a controversial state airline will get a 400 million rupee injection from the Treasury which will strengthen its balance sheet, an official said.

In 1993 the government injected 24.088 billion rupees into two state banks and in 1996 another 23.873 billion rupees were injected to state banks through treasury bonds to make up for bad loans and politically directed lending including to state projects which could not repay the loans, like Mihin Air.

Lankaputhra Bank itself has been merged with another newly created state bank, SME Bank which sagged under its own bad loans shortly after it was created despite the expensive 50 billion rupee lesson, less than a decade earlier.

Banks like SME were created following election promises. Initially they were set-up without a membership to the country’s credit information office, allowing ‘blacklisted’ borrowers to get loans.

Many ordinary people in Sri Lanka have no idea that any government spends money taken from taxing the people, inflation (printed money from the Central Bank) or through what is called ‘generational theft’ or borrowing through long term bonds which will burden the children