ZCZC
BCN-29
SRILANKA-IMF-ECONOMY-ENERGY-AVIATION
IMF releases $250 mn of Sri Lanka loan, seeks airline shake-up
COLOMBO, June 2, 2018 (BSS/AFP) – The International Monetary Fund announced
the release of the latest instalment of Sri Lanka’s $1.5 billion bailout on
Saturday, but warned that restructuring the loss-making national airline was
essential to sustain economic recovery.
The IMF welcomed the island nation’s increase in fuel prices last month —
a precondition for it to receive $252 million of the three-year loan approved
in June 2016.
Sri Lanka’s economy has been on the mend since the IMF bailout, but growth
in 2017 was more sluggish than expected and at 3.1 percent was the slowest in
16 years.
The release of the latest tranche of the loan had been held up pending the
government agreeing to raise fuel prices to recover production costs and do
away with subsidies.
The IMF said the price hike by state-run Ceylon Petroleum Corporation, in
some cases by as much as 130 percent, was a “major achievement” that would
reduce fiscal risk.
The price of kerosene oil, widely used in rural Sri Lanka for cooking and
in lamps, was also more than doubled last month, while gasoline prices
increased by just under 15 percent.
The IMF said Sri Lanka should also implement a pricing policy for
electricity, which is currently subsidised for households and small
businesses.
“It is essential for the authorities to implement an automatic pricing
formula for electricity and a restructuring plan for Sri Lankan Airlines,”
IMF’s Deputy Managing Director Mitsuhiro Furusawa said in a statement.
One of the biggest drags on the country’s balance sheet is national carrier
Sri Lankan, which has accumulated losses and debts of over $2 billion and is
a huge burden on taxpayers.
The government has failed to privatise the airline due to a lukewarm
response from investors while an attempt to find an international partner to
revive it has also failed.
Meanwhile, Sri Lanka’s real estate sector has been expanding rapidly —
raising concerns of a bubble — and the Central Bank of Sri Lanka has said
the sector is under close watch to prevent fallout for banks.
“While financial soundness indicators remain stable, continued credit
growth in the real estate sector warrants close monitoring,” said Furusawa.
BSS/AFP/HR/1345