Sri Lankan government to absorb $553m in debt from national carrier
The country is undertaking a major divestiture drive in loss-making state-owned enterprises
05 March 2024 - 14:00
byUditha Jayasinghe
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Colombo —Sri Lanka's cabinet has approved a proposal to absorb about $553min debt from state-run Sri LankanAirlines, a top official said on Tuesday, to smoothen its divestiture and make it more attractive to potential investors.
Sri Lanka, which is struggling to emerge from its worst financial crisis in decades, is undertaking a major divestiture drive in loss-making government-owned enterprises, including the national carrier, under an agreement with the IMF for a $2.9bn bailout.
The cabinet approved a proposal for the country's treasury to absorb part of the national carrier's debt, which includes $378m owed to state banks and a $175m state-backed bond it defaulted on last February, ports, shipping & aviation minister Nimal Siripala de Silva told reporters.
Sri Lanka expected about $500m from the divestiture, which the government hoped to complete in six months, he added.
“The debt will be reduced to about half of the amount which is there now. Therefore, we feel that there will be more airlines, and entrepreneurs or investors that will come now the airline becomes attractive,” he said.
The total debt of Sri Lankan Airlines is estimated to be about $1.2bn.
The airline, which has been racking up losses for years, invited bids on October 31, but the deadline to close bids by December 4 was extended by 45 days, de Silva said. The government will continue funnelling about $60m-$70m per month for the next six months to keep the carrier afloat.
“Otherwise, if we go at this rate without any assistance the airline will collapse at any moment and 6,000 employees will be out of employment,” de Silva said.
Sri Lanka's economy is gradually recovering from the financial crisis that was caused by record low reserves, leading to skyrocketing inflation and currency depreciation.
The airline, one of Sri Lanka’s biggest loss-making state enterprises, has struggled in recent years with a fall in tourism because of the Covid-19 pandemic and the economic crisis.
The International Finance Corporation, a member of the World Bank Group, is the transaction adviser.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Sri Lankan government to absorb $553m in debt from national carrier
The country is undertaking a major divestiture drive in loss-making state-owned enterprises
Colombo —Sri Lanka's cabinet has approved a proposal to absorb about $553m in debt from state-run Sri Lankan Airlines, a top official said on Tuesday, to smoothen its divestiture and make it more attractive to potential investors.
Sri Lanka, which is struggling to emerge from its worst financial crisis in decades, is undertaking a major divestiture drive in loss-making government-owned enterprises, including the national carrier, under an agreement with the IMF for a $2.9bn bailout.
The cabinet approved a proposal for the country's treasury to absorb part of the national carrier's debt, which includes $378m owed to state banks and a $175m state-backed bond it defaulted on last February, ports, shipping & aviation minister Nimal Siripala de Silva told reporters.
Sri Lanka expected about $500m from the divestiture, which the government hoped to complete in six months, he added.
“The debt will be reduced to about half of the amount which is there now. Therefore, we feel that there will be more airlines, and entrepreneurs or investors that will come now the airline becomes attractive,” he said.
The total debt of Sri Lankan Airlines is estimated to be about $1.2bn.
The airline, which has been racking up losses for years, invited bids on October 31, but the deadline to close bids by December 4 was extended by 45 days, de Silva said. The government will continue funnelling about $60m-$70m per month for the next six months to keep the carrier afloat.
“Otherwise, if we go at this rate without any assistance the airline will collapse at any moment and 6,000 employees will be out of employment,” de Silva said.
Sri Lanka's economy is gradually recovering from the financial crisis that was caused by record low reserves, leading to skyrocketing inflation and currency depreciation.
The airline, one of Sri Lanka’s biggest loss-making state enterprises, has struggled in recent years with a fall in tourism because of the Covid-19 pandemic and the economic crisis.
The International Finance Corporation, a member of the World Bank Group, is the transaction adviser.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.