Sri Lanka seeks Indian FDI for state corporate sector restructuring: Report

Sri Lanka is implementing measures to rejuvenate its economy after receiving the initial instalment of financial assistance from the International Monetary Fund (IMF), and as a result, this could create possibilities for the Indian corporate sector.

According to ET, as part of its plan for economic recovery and fiscal consolidation, Sri Lanka is considering restructuring its state-owned enterprises and divesting from sectors such as airlines, hotels, and hospitals. This move is expected to create investment opportunities for Indian investors.

Last month, the International Monetary Fund (IMF) approved a $3 billion loan program for Sri Lanka, a crucial step for the bankrupt nation to stabilize its economy and begin restructuring its debt.

A source based in Colombo has informed ET that Tata Enterprises, a major industrial conglomerate in India that recently acquired Air India from the government, is being considered as a possible investor in Sri Lankan Airways.

To facilitate the privatization or restructuring of Sri Lankan Airlines, the Sri Lankan government has set up a "State-Owned Enterprise Restructuring Unit". It is worth noting that Sri Lankan Airlines was a highly profitable airline when it was previously privatized, with 40% of its shares sold to Emirates Airlines, who managed the airline operations.

To expand its customer base in India, Sri Lankan Airlines is allegedly considering launching flights from three more Indian cities, including Ahmedabad.

Currently, the airline operates in nine cities in India. Many Sri Lankan Airline' flights are routed through India, and it would be beneficial for Indian airlines to collaborate with the Sri Lankan service provider.

In 2022, Sri Lanka's economy contracted by 7.8% and is further expected to shrink by 3% in 2023 as it continues to grapple with the challenge of debt restructuring and balance of payments difficulties, as per ANI reports.

ADB stated that reform measures such as the reversal of the tax it cut in 2019, and the recent approval of the IMF loan arrangement will support the country's efforts to stabilize its economy.

(With inputs from agencies)