Budget 2023 proposes restructuring most fiscally significant state-owned enterprises

• Sri Lanka Telecom, Colombo Hilton, Waters Edge, Sri Lanka Insurance Corporation and SriLankan Airlines to be restructured

In an effort to strengthen the revenue position of the country, the government would initiate the restructuring of some of the profit-making state-owned enterprises, President Ranil Wickremesinghe said. 
Measures would be taken to restructure Sri Lanka Telecom, Colombo Hilton, Waters Edge, Sri Lanka Insurance Corporation and SriLankan Airlines, Wickremesinghe told Parliament yesterday, presenting Budget 2023. 
Other than the debt-laden national carrier that continues to be a burden to the national economy, the remaining four SoEs are profit-making. 

According to the proposals presented, the proceeds following the restructuring of the SoEs and their subsidiaries will be used to firm up the foreign exchange reserves of the country and to strengthen the rupee. “The strategic interventions will be made to SoEs, with the anticipation of achieving economies of scale and other benefits. Therefore, I propose to line up the similar nature of businesses by way of backward, forward or horizontal integration,” Wickremesinghe said in his capacity as the Finance Minister.

The government had already presented revenue-generating proposals at three occasions prior to the presentation of Budget 2023, reversing the sweeping tax cuts that were introduced in end-2019.  The revenue proposals mainly included changes to the income tax and Value Added Tax (VAT) while addressing tax policy gaps and rationalising tax concessions.  

Hence, Budget 2023 did not contain any major revenue proposals, to the surprise of some, as speculation was rife that the government may introduce a wealth tax, which is part of the programme with the IMF, in Budget 2023.
The government expects to collect Rs.3,130 billion as tax revenue in 2023, as opposed to Rs.1,298 in 2021.
Fiscal stability through revenue consolidation typically remains a key ingredient in the IMF’s formula for economic recovery. Meanwhile, restructuring of state-owned enterprises (SOEs) is also a key reform Sri Lanka has to undertake under a prospective IMF programme to get his fiscal house in order.  

Though Wickremesinghe mentioned a few SOEs such SriLankan Airlines, Sri Lanka Insurance, Sri Lanka Telecom, etc., which have been earmarked for restructure, he fell short of giving out further plans for the sector, which remains a massive burden to the national economy.  

“At present, we are bearing the cost of 420 government institutions and enterprises. The annual loss of these major 52 SOEs is Rs.86 billion. I hope to table these lists of institutions in Parliament in two or three days. Has the country benefited from these institutions for many years? Or has the country suffered?” Wickremesinghe said.   Meanwhile, the government allocated Rs.43 billion from Budget 2023 for social safety net programmes. Wickremesinghe said the process of selecting welfare beneficiaries using new eligibility criteria would start in January 2023 and the eligibility list would be published. 

“Payment under the new welfare benefit payment schemes are expected to start by April 2023. Until then, the existing welfare benefit schemes will be maintained,” he said.