Sri Lanka’s state-owned enterprises (SOEs), long burdened by inefficiency and financial mismanagement, have racked up a staggering cumulative loss exceeding Rs. 8 trillion over the past 30 years—an amount nearly equivalent to the country’s pre-2022 sovereign external debt. This stark figure underscores the urgency of structural reforms under the government’s IMF-supported economic recovery program.
According to senior Finance Ministry officials, the government currently spends nearly Rs. 300 billion annually to keep these underperforming institutions afloat. This fiscal drain has diverted public funds away from critical sectors such as healthcare, education, and infrastructure.
Despite years of losses, the tide may be turning. Thanks to macroeconomic stabilization and corrective measures initiated in 2023 and 2024, the SOE sector has begun to show signs of recovery. Reforms include cost-reflective pricing for electricity and fuel, the introduction of a water tariff formula, and significant balance sheet restructuring for key entities.
“These reforms were not based on a fixed model but are being adapted case by case,” said Deputy Minister of Economic Development Anil Jayantha Fernando. Key restructuring actions included transferring legacy debts to the government’s balance sheet, settling cross-liabilities, and enhancing institutional management.
Results are beginning to show. In 2024, the combined profits of the 52 strategically important SOEs rose by 19.9% to Rs. 534.1 billion from Rs. 445.3 billion in 2023. Among 41 non-financial SOEs, 24 returned profits, though the number of loss-making entities rose to 17, up from 13 the previous year. Data reveals that nearly Rs. 2.9 trillion was lost by 450 SOEs between 2012 and 2022, with 55 key enterprises accounting for Rs. 1.2 trillion in losses from 2006 to 2020.
Persistent losses have largely been driven by mismanagement, political interference, and lack of financial discipline. In response, the Cabinet has approved the drafting of the Public Commercial Business Management Bill, spearheaded by President and Finance Minister Anura Kumara Dissanayake. The proposed legislation seeks to overhaul governance of SOEs by enforcing performance-based management, mandating audited financial disclosures, and enhancing fiscal oversight.
The government also sees potential for divestiture in select SOEs as part of its long-term strategy. However, officials stress the importance of public awareness and support to sustain reform momentum and prevent reversals.
With more than 400 SOEs operating across vital sectors such as energy, water, aviation, and finance—and 52 classified as strategically important—turning them into value-generating institutions is crucial for Sri Lanka’s fiscal health and economic stability.
