Sri Lanka's new government reverses key economic reform for IMF bailout package

COLOMBO: The new National People's Power (NPP) government in Sri Lanka on Tuesday announced its first reversal of a key element in the ongoing IMF bailout programme concerning the loss-making state-owned enterprises.

The government reversed the Electricity Act, approved in June this year under then-president Ranil Wickremesinghe's government, introducing major reforms to the state power entity Ceylon Electricity Board (CEB).

The Marxist NPP trade unions had then agitated against the bill.

A CEB trade union leader who led the agitation is an NPP candidate in the parliamentary election scheduled for November 14.

A CEB statement on Monday said the entity's privatisation programme would be scrapped and vowed to amend the CEB Reforms Act of 2024.

It said there would be no privatisation of state-owned power plants, transmission and distribution processes.

The CEB Reforms Act of 2024 paved the way for private sector competition in power generation. The move was aimed at easing the burden on public finances and increasing the share of renewable energy to 70 per cent by 2030.

The CEB reforms aimed at minimising losses to the treasury was a key commitment made by Sri Lanka to the IMF in the near USD 3 billion bailout sealed in 2023.

The news on the CEB Act comes as the IMF had been delaying its third review until the conclusion of elections on the island.

The fourth tranche of the facility would not be released until the completion of the third review.

The government of NPP leader Anura Kumara Dissanayake, who won the September presidential election narrowly with just 42 per cent of the vote, claims the CEB privatisation was against the mandate of the new president.

This was the second reform policy reversal indicated by the NPP government following the announcement not to privatise the national carrier Sri Lankan Airlines.