Sri Lanka’s state radio awards contract for solar farm

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ECONOMYNEXT- Sri Lanka may have to close loss-making state enterprises, many of which are overstaffed, and will have to cut staff to reduce the burden on the public amid a severe economic crisis, cabinet spokesman the minister has said. Bandula Gunwardena.

“To get out of this crisis, we need to increase our income. A restructuring will have to be done,” Minister Gunewardena told reporters on Tuesday.

“We may have to close some loss-making state-owned enterprises or take other measures.”

Gunawardane said last year that state tax revenue was 1.298 billion rupees, but 1.115 billion was spent on salaries and pensions.

“We only had 153 billion rupees for all other things,” Gunawardena said. “For debt repayment, we need more than 1 trillion rupees. Anyone who comes to the government, the revenue does not meet the two main needs of the country, namely salary and debt repayment.

Debt repayment is not a budget item per se, but is deferred until the central bank prints money to keep interest rates low.

Gunewardena, who is media minister, said agencies under his ministry were also overstaffed and facing financial problems.

State media corporations are maintained with great difficulty, and treasury supplements from taxes on the people to pay salaries and wages of these institutes were no longer possible due to the current currency crisis.

“Therefore, I have advised all state-owned media companies to try to earn money to pay the salaries of their employees,” Gunawardane said.

“I spoke to their boards. If there are assets that can be sold or disposed of and used to compensate those surplus employees under a voluntary retirement system, that is a way to sustain organizations in the future.

A formula already existed for Voluntary Retirement Schemes (VRS).

“We have no intention of suspending anyone’s services without giving compensation. There is a formula for that,” Gunawadane said.

“Even earlier, these suspensions were made according to this formula. In state-owned media entities, retirements were also done under this formula before that,”

But in the past, VRS have been followed by new hires by the next government.

However, the minister said that due to the renewal of these vacancies when the government and changes of ministers resulted in a continuous loss for these entities.

“This time it can’t be done,” Gunewardene said. “If we remove surplus employees by paying them compensation and fill them with my people, that burden will once again be placed on the general public,”

“It shouldn’t be like this.”

In addition to state-owned enterprises, Sri Lanka is also trying to reduce the central government deficit within a three-year framework, with the deficit in 2023 to be reduced to 6.8% of gross domestic product from 9.9% this year.

Sri Lanka is trying to cut government spending after running large deficits following three currency crises triggered by economists’ targeting of the output gap, initially by printing money, but at from 2019 also by reducing taxes.

In April 2022, Sri Lanka defaulted after borrowing heavily in the bond markets and depleting its reserves.

Sri Lanka is now trying to restructure debt and is in talks with the International Monetary Fund for a bailout. (Colombo/August 24, 2022)


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