• Govt. struggling to make monthly payments to public sector?
• Power and Energy Minister denies money printing charges
• Says payment of OT and bonuses restricted for CEB and CPC
• Govt. must focus on restructuring SOEs: Dr. Roshan Perera
• Says tariff hike needed due to failures of CEB and governments
• CEB’s cost calculation flawed: MP Champika Ranawaka
• Calls for robust and transparent reform framework
• Core issue of poor governance remains untackled
• Public sector reforms unavoidable: State Minister Semasinghe 

Public sector reforms, particularly of State-Owned Enterprises (SOEs), can no longer be put on the backburner and need to be expedited to reduce its burden on the Budget, policy experts say.

This, as reports over the last two months indicated that the Government was struggling to make monthly payments to the bloated public sector amidst State expenditure cuts brought in by the 2023 Budget and tougher fiscal control exerted by the Central Bank of Sri Lanka (CBSL).

Social media was abuzz during the last few weeks that the CBSL was considering the possibility of printing money – a practice it is trying to step away from – to make December payments to several State institutions and enterprises as mandated bonuses also needed to be provided. 

One allegation was that the Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC) were struggling to source the funds needed to make payments for their staff.

‘Not printing money’

However, when The Sunday Morning inquired from Minister of Power and Energy Kanchana Wijesekera if both enterprises, the CEB and CPC, required money to be printed to make December wage payments, the Minister denied knowledge of such a necessity. 

He said the CEB and CPC were streamlining their overheads and that the payment of ‘overtime’ and bonuses had been restricted, especially following a directive of the utilities regulator the Public Utilities Commission of Sri Lanka (PUCSL).

When contacted, Treasury Deputy Secretary R.M.P Rathnayake also denied that the State was printing money to honour wage commitments. Attempts to contact Central Bank Governor Dr. Nandalal Weerasinghe regarding reports of money printing failed.

Expedite public sector reforms

According to public policy specialist and former Director of the CBSL Dr. Roshan Perera, the Government needs to expedite public sector reforms with a focus on restructuring SOEs.

“We have been talking about public sector reforms for a long time. The last set of reforms happened more than 20 years ago. Since then Sri Lanka has not carried out serious public sector reforms. It is also part of the reason why Sri Lanka is facing this crisis; the SOEs were not reformed and the public sector was allowed to grow so large,” Dr Perera explained.

According to Dr. Perera, when enacting reforms for SOEs, a proper framework should be established and followed.

“The first thing that should be done is making sure that SOEs are not selling any goods or services at a loss. There are various measures that can be taken to reduce SOE losses and improve the efficiency of these institutions. 

“If you take the CPC, the prices have been steadily increasing but what should have been done is that these price increases could have happened through the introduction of a pricing mechanism. Right now we do have a pricing formula, but we do not see it necessarily being in operation. The CPC is still making losses,” Dr. Perera stated.

Tariff hike

Commenting on the hotly-debated topic of another electricity tariff increase this month, Dr. Perera pointed out that part of the need to increase the tariff was the failure by the CEB and successive governments to implement planned generation projects according to the envisaged timelines.

“Some of these projects have been in the pipeline for years and not implemented. Also, some low-cost projects, like the renewable energy ones, were also delayed. These are now causing the bottlenecks which are forcing us to rely more on high-cost energy sources (fuel and coal – thermal generation). It is unfair to burden the paying public with the failure of the CEB and those governments,” Dr. Perera argued.

Tariff hike ‘unreasonable’

Commenting on the need to expedite public sector reforms, former Minister of Power Patali Champika Ranawaka told The Sunday Morning that the CEB’s cost calculation was flawed, with the proposed tariff increase being unreasonable as it would burden consumers who had been paying their bills for years. 

Ranawaka also argued that Sri Lanka needed to have a robust framework with transparency to reform the public sector, especially loss-making SOEs.

Poor governance

Commenting on underlying causes for the lack of reforms and poor public sector performance, Dr. Perera opined that the core issue of poor governance remained untackled thus far.

“The bigger issue is about governance. We need to have the right policies and the proper people to run SOEs. All these entities should have been kept profitable. The governance issue has to be expressed. Even if the SOEs are tweaked to deliver profits, they are temporary measures unless the governance issues are fixed. They need to have proper management and well experienced and competent boards appointed to them. The recruitment to such enterprises needs to be done properly, like for a commercial company; only the best and most suitable people must be appointed,” Dr. Perera explained.

She opined that unless Sri Lanka enacted a robust public sector reforms programme backed by strong bipartisan support, only short-term successes would be achieved.

Reforms unavoidable

Responding to a question, State Minister of Finance Shehan Semasinghe told The Sunday Morning that public sector reforms were unavoidable, adding that long-held perceptions that SOEs, especially loss-making ones, were an asset to the country were wrong.

“If somebody thinks that SOEs don’t eat into our money, they are quite mistaken. They are eating up taxpayer funds,” Semasinghe charged, adding that the Government was steadfast in its efforts to reform SOEs.

“For the SOE sector, we have appointed a committee to propose reforms; we expect to get this report soon. Of course, we can do alterations to those recommendations; if there are better ideas submitted, there is room to look at them and adopt them where necessary. SOE reforms and tax reforms are the two main approaches the Government is looking at to increase revenue,” Semasinghe stated.