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

After printing more money to pay government employees, Sri Lanka considers selling the national airline to reduce losses.

Sri Lanka’s new government is planning to sell the national airline to reduce 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 by Prime Minister Ranil Wickremesinghe yesterday (May 17). A few days before the country officially defaulted on foreign debt (April 12), SriLankan Airlines also reported a loss of 45 billion rupees ($124 million) in the financial year ending 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 Colombo government acquired a stake in SriLankan Airlines from Emirates. The national airline has a fleet of 25 Airbus SE aircraft, which fly to cities in Europe, the Middle East as well as 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 less than a week. He was forced to print more money to pay for the bureaucracy, putting pressure on the local currency to increase. He also acknowledged that the country has only one day of gasoline reserves 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,” Mr. Wickremesinghe urged.

Sri Lanka’s Prime Minister pledged to announce a new “relief” package to replace President Gotabaya Rajapaksa’s previous budget that caused the country’s inflation to rise the fastest in Asia. His cabinet will also propose to parliament to increase the limit for issuing treasury bills to Rs 4 trillion from Rs 3 trillion. The budget deficit is expected to be 13% of GDP for this year.

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

The island nation will continue to fall into default when the grace period for two unpaid foreign bonds ends tomorrow (May 18). This is the latest difficulty for a country reeling from economic weakness and social unrest.

The Colombo All-Share Index of Sri Lankan stocks was up 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’s still among the worst indexes in the world Bloomberg follow.

Previously, on April 12, Sri Lanka declared that it could not pay its foreign debt of 51 billion USD and was waiting for a support package from the International Monetary Fund.

Session An (according to Bloomberg)

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