As part of the public sector reforms, subsidies to state owned enterprises (SOEs) must be suspended, including guarantees on SOEs debt, former Acting Governor of the Reserve Bank of New Zealand Prof. Grant Spencer said.
“It is essential to stop CBSL lending to SOEs; instead use targeted support measures for the most adversely affected persons,” Prof. Spencer told a special lecture held under the theme “Key Elements of a Market-based Financial System” at the Central Bank of Sri Lanka Auditorium.
Prof. Spencer opined that reforms must include commercializing or eventually privatizing SOEs.
“This would lead to improved governance and financial control of government departments.”
In Sri Lanka, managing the performance of SOEs has become a critical factor given the lingering debt crisis. Speaking further, Prof Spencer highlighted the need for Sri Lanka to move towards a floating exchange regime if the country desires to control domestic conditions.
“Float of rupee should follow initial financial deregulation and try to set the starting point somewhere near equilibrium.” Emphasising the need to support the float with a strong and clear communication strategy, Prof. Spencer said major banks will become the main price makers post float.
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