Sri Lanka: One year after mass uprising, economic turmoil
Food and healthcare costs continue to surge, and poverty rate has doubled, but at least tourists are back.
COLOMBO – As Sri Lanka embarks on economic reform and divests loss-making state-owned enterprises, some fear the potential loss of essential services and livelihoods that have served as a safety net for many.
The US$3 billion (S$4 billion) bailout from the International Monetary Fund (IMF) in March and US$700 million welfare support from the World Bank in June came with strings attached, including debt restructuring and structural reforms.
The most controversial reforms are yet to come: selling state-run enterprises to boost state revenue and cut losses.
In March, the Finance Ministry’s state-owned enterprises restructuring unit approved the divestment of shares of seven state-owned enterprises, including SriLankan Airlines, Sri Lanka Telecom and Litro Gas.
The International Finance Corporation (IFC), a member of the World Bank Group, is the transaction adviser for some of these firms – SriLankan Airlines, Lanka Hospitals Corporation and Sri Lanka Telecom.
Local reports claim that the government will float a holding company to bring these companies under one umbrella, like Singapore’s Temasek, before they can be sold through the stock market.
Economics lecturer Ahilan Kadirgamar from the University of Jaffna in northern Sri Lanka highlighted the potential repercussions on the populace as the government cedes to the demands of the IMF and World Bank “almost on autopilot”.
“Once the government passes the public finance management law it is drafting, it cannot finance state enterprises. The cost of public sector services will skyrocket and then selling state enterprises will become inevitable,” he said.