Sri Lanka sells airlines, prints more money to deal with crisis

After more money was printed to pay government workers, Sri Lanka is considering selling the national carrier to cut losses.

Sri Lanka’s new government plans to sell the national airline to cut losses. This is part of an effort to stabilize the country’s finances as authorities are forced to print money to pay government employees.

The plan to privatize SriLankan Airlines was shared yesterday (May 17) by Prime Minister Ranil Wickremesinghe. Days before the country officially defaulted on external debt (April 12), SriLankan Airlines also reported a loss of 45 billion rupees ($124 million) in the fiscal year ended March 2021.

“This damage should not be left to the poorest of the poor who have not yet boarded a plane,” Mr Wickremesinghe said.

In 2010, the Government of Colombo acquired a stake in SriLankan Airlines from Emirates. The national carrier operates a fleet of 25 Airbus SE aircraft, serving cities in Europe, the Middle East and South and Southeast Asia.

A SriLankan Airlines plane.  Photo: Konstantin von Wedelstaedt

A SriLankan Airlines plane. Photo: Konstantin von Wedelstaedt

Wickremesinghe’s new prime minister has been in office for less than a week. He was forced to print more money to pay for the bureaucracy, putting pressure on the local currency to appreciate. He also acknowledged that the country only has one-day reserves of petrol and that the government is working to raise dollars on the open market to pay for the three oil tankers that are moored in Sri Lankan waters.

“The next few months will be the most difficult of our lives. We must immediately form a parliament or body with the participation of all political parties to find a solution to this crisis. current crisis,” urged Mr Wickremesinghe.

Sri Lanka’s prime minister vowed to announce a new “bailout package” to replace President Gotabaya Rajapaksa’s previous budget, which saw the country’s inflation rise fastest in Asia. His cabinet will also propose to Parliament to increase the limit on issuance of Treasury bills from Rs 3 trillion to Rs 4 trillion. The budget deficit is expected to be 13% of GDP this year.

Mr Wickremesinghe has yet to appoint a finance minister to lead bailout talks with the International Monetary Fund and seek credit from India and China. It is unclear if the Sri Lankan government will receive the money in the absence of a full cabinet.

The island nation will default further when tomorrow (May 18) the grace period on two outstanding foreign bonds ends. This is the latest trouble for a country wracked by economic weakness and social unrest.

The Colombo All-Share Index of Sri Lankan equities rose 3% when the market opened earlier this week. Thanks to this increase, the year-to-date decline has narrowed to less than 32%. However, it is still among the worst indices in the world Bloomberg Follow.

Earlier on April 12, Sri Lanka said it could not pay its $51 billion in foreign debt and was awaiting an IMF bailout package.

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