Sri Lanka, which is set to default on foreign debt and is printing money to pay local salaries, plans to sell its national airline to help stanch losses.
The government proposes to privatize Sri Lankan Airlines, Prime Minister Ranil Wickremesinghe said in a televised address to the nation Monday. The carrier made a loss of 45 billion rupees ($124 million) in the year ending March 2021, he said.
“It should not be that this loss has to be borne by the poorest of the poor who have not set foot in an aircraft,” Wickremesinghe said.
The premier—less than a week into the job—pledged to announce a new “relief” budget to replace President Gotabaya Rajapaksa’s “development” budget that has stoked the inflation rate to the fastest in Asia. The nation has only one day’s stock of gasoline and the government is working to obtain dollars in the open market to pay for three ships with crude oil and furnace oil that have been anchored in Sri Lankan waters, Wickremesinghe said.
Wickremesinghe, who was appointed last week following violent clashes between government supporters and protesters demanding Rajapaksa’s resignation, is yet to appoint a finance minister to lead bailout talks with the International Monetary Fund. The administration is also seeking bridge loans from nations including India and China, though it’s unclear if they will get the cash in the absence of a full cabinet.
“The next couple of months will be the most difficult ones of our lives,” Wickremesinghe said. “We must immediately establish a national assembly or political body with the participation of all political parties to find solutions for the present crisis.”
Sri Lanka is sliding into a default as the grace period on two unpaid foreign bonds ends on Wednesday, the latest blow to a country rattled by economic pain and social unrest.
Sri Lanka Stumbles Toward Its First Default on Foreign Debt (2)
Wickremesinghe said he is forced to print money to pay salaries, which will pressure the rupee. Cabinet has decided to bring a proposal to parliament to increase the treasury bill issuance limit to 4 trillion rupees from 3 trillion rupees, Wickremesinghe said, forecasting a budget deficit of 13% of gross domestic product for the year ending December 2022.
The nation’s dollar bonds edged higher on Monday, though they remained deep in distressed territory. The extra yield investors demand to hold the sovereign notes over US Treasuries narrowed 22 basis points to 37.29 percentage points, according to JPMorgan Chase & Co. data.
Sri Lankan Airlines, which the government bought back a stake in from Dubai’s Emirates in 2010, has a fleet of 25 Airbus SE planes, according data from tracker FlightRadar24. The carrier flies to destinations in Europe, the Middle East as well as South and Southeast Asia, according to FlightRadar24.