Treasury and Finance Ministry Secretary Mahinda Siriwardana added that although the Government is able to increase the salaries of State employees in the upcoming year (2024), it is not possible to provide tax relief as Sri Lanka continues to be behind the revenue targets set by the International Monetary Fund (IMF).

Through the 2024 Budget proposals, the Government has decided to allocate Rs. 450 billion to recapitalise the State banks in order to secure stability and provide security as the Government is in the process of restructuring local debt accumulated by State-owned enterprises, Siriwardana said. Delivering the keynote address at an expert panel discussion organised by the Centre for Banking Studies under the theme “Decoding the National Budget 2024”, he revealed, however, that the recapitalisation would not affect local rupee-denominated markets.

According to Budget proposals for 2024, the Ceylon Petroleum Corporation’s debt is valued at Rs. 1 trillion, while the Ceylon Electricity Board has an accumulated debt of Rs. 800 billion owed to State banks.

Due to the debt restructuring process, banks face the risk of recording large losses which will have to be met by capital infusions from taxpayer funds, he added.

In addition to the Rs. 450 billion allotted for recapitalisation, it is proposed that 20% of shares of the two large State-owned banks should be given to strategic investors or the public to improve capital and reduce the burden on taxpayers’ funds, according to Siriwardana.