FIRA sees the light of day through a supplementary estimate

The Government is now gearing to establish a Financial Institution Restructuring Agency (FIRA) proposed in the 2016 budget to infuse a life blood for ailing finance companies, obtaining money through a recent supplementary estimate.

According to this supplementary estimate presented in parliament, a sum of Rs. 10 billion has been allocated for this purpose although the 2016 budget has made an allocation of Rs. 10 billion as equity and also issue a Treasury bond to the value of Rs. 25 billion with a tenure of five years for the FIRA.

This agency will be established on the lines of the Resolution Trust Corporation in the US to help failing finance companies which are to be recapitalised and their troubled assets to be taken over by this agency for purposes of restructuring, the 2016 budget proposal revealed.

At present there are 47 finance companies registered with the Central Bank, and several of them are on the verge of collapse, Finance Houses Association sources revealed.

The previous government has implemented finance and leasing company consolidation plan to rescue some of the ailing Non Bank Financial Institutions (NBFIs).

Up to November 2014, 41 NBFIs and nine banks had confirmed their consolidation plans, Central Bank data showed.

Of this, eight NBFIs and two banks have completed their respective consolidation plans, whilst 33 NBFIs and seven banks are still progressing and are in different stages in their plans.

The Government has to submit a supplementary estimate as 80 per cent of the country’s revenue was spent for recurrent expenditure, an economic expert told the Business Times.

Although Finance Minister Karunanayake reiterated that additional funds would be granted under supplementary estimates for only disaster situations in 2017, the government is resorting to obtain money from the Treasury through supplementary estimates, he added.

However according to Finance Ministry sources, the supplementary allocations are provided strictly for the purposes specified in approved budget estimates to relevant spending agencies having carried out a need assessment, giving consideration to relevant financial regulations, and approved procedures.

This supplementary provision did not change the approved total expenditure limits of the annual estimate by Parliament.