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Several state institutions cause contingent liabilities

Sri Lanka’s Ministries and state institutions are in a bank borrowing spree increasing liabilities while posing contingent risk to government balance sheets, official financial statistics showed.

Liabilities of ministries, state institutions and State-Owned Enterprises (SOEs) are primarily driven by Government guarantees, and the government that provides a larger quantity of such support also end up correspondingly more vulnerable.

Government guarantees have increased substantially in Sri Lanka and such guarantees play a crucial role in lowering cost of financing for SOEs, allowing for greater returns on investment. But they are a form of support that gives rise to explicit contingent liabilities.

According to Finance Ministry sources,the value of the guarantees and letters of concession issued by the General Treasury to banks for the loans obtained by public institutions and enterprises as at 31st December 2017 is Rs. 652 billion.

The General Treasury pays back the loan of Rs. 185 billion in relation to 04 bank guarantees provided for the loan obtained by the Ministry of Defense and Urban Development, 02 bank guarantees provided for the loan obtained by the Sri Lanka Land Reclamation and Development Corporation, 90 bank guarantees provided for the loan obtained by the Road Development Authority, and 04 bank guarantees provided for the loan obtained by the National Water Supply and Drainage Board.

(LI)

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