ECONOMYNEXT – Sri Lanka’s 2027 capital expenses will be around 2,000 trillion rupees and the government is in the process of speeding the procurement and approvals to fast track public investment projects, Cabinet Spokesman and Minister Nalinda Jayatissa said.
Sri Lanka has historically failed to spend its total capital expenditure allocations due to delay in procurement and approval process from the line ministries.
The island nation has spent only 17.4 percent of the allocated total capital expenditure of Rs.1,380 billion rupees as of mid-June this year, Finance Ministry officials have said.
Sri Lanka’s chronic failure to utilize its full budgetary allocations for capital investment reflects deep-seated structural inefficiencies in public financial management and project execution, analysts and economists say.
Year after year, bureaucratic delays, protracted procurement disputes, politicized project selection, and a lack of technical expertise within line ministries leave a significant portion of capital expenditure unspent on the Treasury books.
“For the upcoming year, we project capital expenditure or development expenditure of 2,000 billion rupees (2 trillion rupees). This is a substantial budget,” Cabinet Spokesman Jayatissa told reporters at the post-Cabinet media briefing on Tuesday.
He admitted the delay in utilizing the capital expenditure has been mainly due to delays in awarding contracts and starting project implementation in October.
“To effectively utilize these funds, awarding contracts in September or starting projects in October is insufficient; work must commence in January. We have established the necessary mechanisms, operational environment, and approvals to support this timeline,” he said.
He said normally by September, procurement activities are finalized and contracts are awarded in most places.
“Normally under this methodology, when work is carried out, this is the timeframe when work commences. Therefore, we can truly assess progress toward the end of December.”
“Progress does not happen in monthly increments of 10%, 15%, or 20%. Rather, by November or December, that percentage increases significantly. We expect it to increase further during this period.”
He said the government has faced a key issue regarding a shortage of tar in certain contracts, which persists currently.
“To address this, we submitted a cabinet paper two weeks ago to import 30,000 metric tons of tar. Although there is some delay in road development projects, we have the capability to complete them,” he said.
“Taking all these factors into account, we issued a circular to all ministries informing them that they do not need to wait until the budget is passed in Parliament. They can prepare their project plans, draft estimates, and initiate procurement activities. Only the final awarding of the procurement should be held back. This allows us to award contracts and commence physical work by January.”
This capital underutilization carries severe long-term repercussions for the island’s economic trajectory.
By failing to deploy allocated funds into critical infrastructure such as transport networks, modernized power grids, and digital public systems, the state stifles productivity growth, worsens structural bottlenecks, and lowers the country’s overall gross domestic product (GDP) potential.
In a fragile post-default macroeconomic climate, this persistent shortfall also sends a negative signal to international development partners and private investors.
“This issue is not unique to our administration; it has been a persistent, long-standing systemic flaw,” Minister Jayatissa said.
“Recognizing this, four months ago we instructed ministries to initiate preliminary activities early. The Ministry of Finance will assume responsibility for facilitating the process so that you can advance procurement activities up to the award stage.” (Colombo/September 15/2026)
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