FINANCIAL CHRONICLE – The Sri Lankan government anticipates capital expenditures of approximately 2 trillion rupees by 2027, with efforts underway to accelerate the procurement and approval processes for public investment initiatives, as stated by Cabinet Spokesman and Minister Nalinda Jayatissa.
Historically, Sri Lanka has struggled to fully utilize its allocated capital expenditure due to delays in the procurement and approval processes from various ministries. According to Finance Ministry officials, as of mid-June this year, only 17.4 percent of the total capital expenditure budget of 1,380 billion rupees has been spent.
Analysts and economists attribute the country’s ongoing inability to effectively deploy its capital investment budget to significant structural inefficiencies in public financial management and project execution. Yearly bureaucratic hurdles, extended procurement conflicts, politicized project selection, and a lack of technical expertise within ministries result in a considerable portion of capital funds remaining unspent, as recorded in the Treasury.
“For the upcoming fiscal year, we expect to allocate capital or development expenditures amounting to 2 trillion rupees. This represents a significant budget,” Jayatissa remarked at the media briefing following the Cabinet meeting on Tuesday. He acknowledged that delays in utilizing capital expenditures primarily stem from the slow process of contract awards and project initiation, which he indicated should begin in October.
“To make effective use of these funds, it’s crucial that contracts are awarded in September, or that projects begin in October. Ideally, work should commence in January. We have set up the necessary mechanisms and approvals to facilitate this timeline,” he explained.
He noted that by September, procurement activities are typically concluded, and contracts are awarded in most instances. “Under this approach, the usual timeframe for project commencement is in line with these activities. Therefore, we can accurately evaluate progress by the end of December.”
Jayatissa emphasized that progress is not linear; rather, significant advancements typically occur in November or December. “We anticipate that progress will accelerate during this period,” he added.
The government is currently facing a critical issue regarding a shortage of tar for certain contracts. “To resolve this, we submitted a cabinet paper two weeks ago requesting the import of 30,000 metric tons of tar. Despite some delays in road development projects, we are confident in our ability to complete them,” he stated.
To mitigate capital underutilization, a circular has been issued to all ministries, allowing them to begin preparing project plans, draft estimates, and start procurement activities without waiting for parliamentary approval of the budget. Only the final contract awards will be delayed, enabling contracts to be awarded and physical work to commence by January.
This underutilization of capital has significant long-term implications for Sri Lanka’s economic path. By not deploying funds into essential infrastructure, such as transportation systems, modern power grids, and digital public services, the government hampers productivity growth, exacerbates structural challenges, and diminishes the potential for overall GDP growth.
In a delicate post-default economic environment, this ongoing shortfall also conveys a negative impression to international development partners and private investors. “This issue is not exclusive to our current administration; it has been a longstanding systemic problem,” Minister Jayatissa remarked. “Acknowledging this, we directed ministries four months ago to begin preliminary activities sooner. The Ministry of Finance will take the lead in facilitating the process to ensure that procurement activities can advance to the award stage,” he concluded. (Colombo/September 15/2026)
