Key reforms on SOEs won’t burden state fiscal operations

While restructuring of State Owned Enterprises (SOEs) is playing a crucial role in the country’s economic recovery process, key reforms were recommended by the SOE Restructuring Unit of the Ministry of Finance and approved by the Cabinet of Ministers last week.

Some of the recommendations include where SOEs have to publish quarterly accounts in parallel to annual accounts; all SOEs (commercial enterprises) to be brought under one holding company. The government cannot offer subsidies to SOEs, it has to be taken as government expenditure. SOEs will no longer be supported by Treasury guarantees and thereby by the state banks assistance. Single borrower limits apply to SOEs.

Addressing the annual conference of the Chartered Accountants of Sri Lanka last Tuesday held at the CA Sri Lanka in Colombo, Ministry of Finance, SOE Restructuring Unit, Chairman and Ceylon Tobacco Company, Chairman, Suresh Shah made these remarks. The conference was organised by the Association of Public Finance Accountants of Sri Lanka and this year’s theme was ‘Smart Management of Public Finance’.

Mr. Shah said, “A policy document on SOEs approved by the cabinet states that SOEs will not only need to publish annual accounts, but quarterly accounts as well. Everyone in the government must realise that end of the day all SOEs have 22 million shareholders, every SOE is a public resource.”

“Have a proper system of governance not just for the holding company but for all SOEs. Cabinet has approved that we mandate the SOE sector good governance rule that have been put forward by the institute and the Securities and Exchange Commission of Sri Lanka,” he said.

One of the major recommendations made in the policy document is that, the government has every right to provide a subsidy to its citizens, but not to park subsidies on SOEs. Those subsidies needs to be accounted as state expenditure, Mr. Shah stressed while highlighting the poor balance sheets of the Ceylon Petroleum Corporation (CPC), SriLankan Airlines and state banks.

Speaking of management of public finance Mr. Shah pointed out three fundamental objectives - sustainable fiscal position, effective allocation of limited resources and efficient delivery of essential goods and services to the citizens of Sri Lanka.

“If we look at all these three aspects of management of public finance after 75 years of independence, it’s fair to say that we have failed. If we Sri Lankans want to change our country and to transform into a nation where we accept the neighbour irrespective of race, religion or community, if you want our country to progress in terms of prosperity and economic development, if we want our country to be different in the way we interact through trade or other foreign relations, we need to do things differently,” noted Mr. Shah.