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Sri Lanka’s new administration intends to sell the national airline to reduce losses as part of efforts to stabilise the country’s finances, even as officials are compelled to print money to pay government salaries.
Prime Minister Ranil Wickremesinghe announced in a televised address to the country on Monday that the new administration intends to privatise Sri Lankan Airlines. He said the carrier lost 45 billion rupees ($124 million) in the fiscal year ending March 2021, just days before the country is slated to legally default on foreign debt.
“This loss should not have to be borne by the poorest of the poor who have never stepped foot on an aeroplane,” Wickremesinghe added.
Wickremesinghe said he was compelled to generate money to pay salaries, putting pressure on the country’s currency. The country has only one day’s supply of gasoline, and the government is seeking to collect dollars on the open market to pay for three ships carrying crude oil and furnace oil that have been anchored in Sri Lankan waters, according to Wickremesinghe.
“The next couple of months will be the most challenging of our lives,” Wickremesinghe predicted. “We must quickly organise a national assembly or political body with the participation of all political parties to identify solutions to the current problem.”
The premier promised to present a new “relief” budget to replace President Gotabaya Rajapaksa’s “development” budget, which contributed to Asia’s highest inflation rate. Wickremesinghe said the cabinet will propose to parliament that the treasury bill issuance cap be raised to 4 trillion rupees from 3 trillion rupees, projecting a budget deficit of 13% of GDP for the fiscal year ending December 2022.
Wickremesinghe was appointed last week after violent skirmishes between government loyalists and demonstrators demanding Rajapaksa’s resignation. He has failed to name a finance minister to head bailout talks with the International Monetary Fund, and is seeking bridge financing from countries such as India and China. It’s uncertain whether the government will receive the funds in the absence of a full cabinet.
Sri Lanka is on the verge of default as the grace period on two outstanding foreign bonds expires on Wednesday, the latest blow to a country beleaguered by economic and social instability.
The country’s dollar bonds rose higher on Monday, although they remained deeply in distress. According to JPMorgan Chase & Co. data, the extra yield investors seek to hold sovereign notes over US Treasuries has shrunk by 22 basis points to 37.29 percentage points.
The Colombo government purchased a share in Sri Lankan Airlines from Dubai’s Emirates in 2010. According to FlightRadar24, the national carrier, which has a fleet of 25 Airbus SE jets, operates to destinations in Europe, the Middle East, as well as South and Southeast Asia.
Key points from the speech:
Revenue in 2022 is expected to be 1.6 trillion rupees, compared to the budgeted figure of 2.3 trillion.
Need $75 million “during the next couple of days”
“There is a potential that inflation may rise further”; the government can no longer afford gasoline and diesel subsidies.
