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06 December 2017

New bank to provide loans to private sector- PM

A new bank to provide development funding to the private sector is to be established next year, Prime Minister Ranil Wickremesinghe said.

The Prime Minister explained that the new bank would have the Treasury, three state banks and main commercial banks as stakeholders.

“The Central Bank Governor and Treasury are also talking to the ADB to have them also come in as a stakeholder,” the Prime Minister added.

Prime Minister Wickremesinghe was addressing the 53rd Annual Report Awards Competition organised by the Institute of Chartered Accountants at the BMICH.

The Bank is expected to have an initial investment of Rs.30-35 billion,the Prime Minister further said.

“This would simplify the process of providing finance to the private sector for business development and remove the need for the government to run separate offices to provide loans.

“For a long time, growth had to come from infrastructure projects which in turn was funded by foreign loans. But, we want growth not through government but the private investment- both local and foreign”, said Wickremesinghe.

The government’s role thus he said was to create the correct climate for investment. One such measure he explained was through the tax incentives provided through the new Inland Revenue Act, which according to the Premier was ‘generous’ for a government strapped deep in debt.

“Through the development of the North and South sections of the Colombo Port, it would become the largest port in the Indian Ocean and together with Trincomalee and Hambantota, the PM expected them to contribute towards making Sri Lanka a logistics hub,” the Premier said.

The government of Sri Lanka still faces the difficult task of finding what it owes and how much it has to pay, the Prime Minister said as he explained that through authorised and unauthorised private placements alone, the government owed Rs 7 Trillion to the national debt.

“The final amount after 40 years will be about Rs 10-12 trillion”, the Prime Minister added.

“In the Ministry of Finance earlier they had a simple way of cooking books. There were no financial obligations made in respect for many of the projects, whatever money was there was given. In our first month, we found that the bill for roads alone was Rs 100 billion more than what was forecasted and given to us,”he explained.

Looking at SriLankan Airlines, the government had not guaranteed any loans and not legally responsible, but the USD 400 million given to them by the Bank of Ceylon and the Peoples’ Bank has ensured that at some stage the government would have to step in.

“We have to now ensure that our financial reporting is in order. The government will bring in a committee of public finance which can go through these. Next year we will bring in a law called the Parliamentary Budget Office Law, following UK and Australian practices, The Office will be independent of the Ministry of Finance and will report only to Parliament. Will make their own independent evaluations of the economy and Budget”

“Therefore,we want Parliament to be in control of Finance and to be independent of the Treasury, so that they can make their own evaluations, the Prime Minister said.