ECONOMYNEXT – Sri Lanka’s state-run SriLankan Airlines has lost 248 billion rupees up to April 2022 with most of it coming from the collapse of the currency, official data showed, amid the worst currency crisis in the history of its intermediate regime central bank.
SriLankan Airlines had earned revenues of Rs71.82 billion in the first four months of 2022.
The airline had lost Rs248.44 billion in the first four months with 145 billion rupees coming from a foreign exchange loss.
Sri Lanka’s rupee collapsed from 200 to 341 to the US dollar by end April 2022 in an attempt to float the currency with a surrender rule.
SriLankan Airlines (SLA) has Rs 618,677.61 million in liabilities, including sovereign guaranteed US$ 175 million bond, Treasury guaranteed bank loans from state banks, aircraft leases, and debt with trade creditors, primarily Ceylon Petroleum Corporation, a Finance Ministry report said.
Sri Lankan has a dollar arrears to Ceylon Petroleum Corporation on fuel bought before 2019. But now it pays in US dollars in time.
“In this context, the government is no longer able to finance SLA’s losses and there is an urgent requirement to restructure SLA’s balance sheet and convert its operating model into a profitable structure,” the report said.
While aircraft leases relate to currently revenue earning assets, the 175 million bond and CPC arrears were taken to fund legacy losses.
Prime Minister Ranil Wickremesinghe has said the airline has to be privatized.
The rupee has collaped from 131 to around 370 to the US dollar after ‘flexible inflation targeting’ began where a notoriously unstable reserve collecting soft-peg was bombarded with open market operations, either to boost inflation (2015) or to boost growth (output gap targeting) from 2018.
State-run Ceylon Petroleum Corporation has been hit a 648 billion loss due to the soft-pegged exchange rate regime.
Sri Lanka has turned its back on classical economics and has rejected single anchor regimes like a clean float or a currency board and is operating an intermediate regime that has depreciated from 4.70 to 370 to the US dollar in belief that there is prosperity at the end of monetary instability and depreciation. (Colombo/June05/2022)