ECONOMYNEXT – Sri Lanka’s non-financial public sector enter which lost 910 billion rupees in 2022, as macro-economists printed money to boost growth and bungled a float with a surrender rule has made profits of 282 billion rupees in 2023, official data shows.
A major turnaround was seen in Ceylon Petroleum Corporation which lost 617 billion rupees in 2022 as the currency collapsed and the country was hit by forex shortages as the central bank printed money.
The CPC losses partly came from loans it was forced to take when the central bank made rate cuts with printed money and officials made the agency take suppliers credits in prior years which were then turned into state bank loans after the currency collapsed.
Both agencies made steep price hikes to compensate for the cost hikes from monetary instability.
In 2023, the central bank operated largely deflationary policy and allowed the rupee to appreciate after lifting a surrender rule. The rupee is still under inconsistent policy, but policy has so far leaned towards monetary stability.
The Ceylon Electricity Board in particular has cut prices in 2024 as imported fuel prices fell with rupee appreciation and there were also good rains.
In Sri Lanka from 1978 in particular when the central bank lost a credible anchor money after the International Monetary Fund’s Second Amendment to its Articles in 1978, energy and other prices only went up.
Countries that lost a credible anchor also started to default after 1978 starting from Latin America which was closest to the US and were among a close group of founder members of the International Monetary Fund along with the US and UK.
Sri Lanka escaped default in the 1980s, as the country did not have external debt unlike Latin American nations, but a reform program started by then President J R Jayewardene was discredited and the country went into deep social unrest.
In 2023, only 11 non-financial state enterprises out of 41 tracked by the Finance Ministry made losses. They included firms in construction, media and plantations.
State plantations companies made losses despite high tea prices.
The rupee appreciated from around 370 to 323 during the year. (Colombo/July17/2024)