By: Staff Writer
October 06, Colombo (LNW): The World Bank has issued a stark warning to Sri Lanka, urging immediate and comprehensive reforms in the energy sector, public administration, and public-private partnerships (PPPs), as the country’s inefficiencies and bloated cost structure continue to undermine competitiveness and fiscal stability.
During a high-level meeting with parliamentary oversight committees on 25 September, a World Bank delegation led by Country Manager Gevorg Sargsyan cautioned that Sri Lanka’s current trajectory was unsustainable without deep structural reforms.
The discussions, held with the Committee on Public Finance (CoPF), Public Enterprises (CoPE), Public Accounts (CoPA), and the Committee on Ways and Means, focused on urgent measures needed to restore economic discipline and attract investment.
Officials highlighted that Sri Lanka’s energy prices remain among the highest in South Asia — nearly double those of regional peers such as India and Bangladesh primarily due to poor pricing policies, political interference, and inefficiencies in state-run utilities.
The World Bank stressed the necessity of market-based pricing, improved investment management, and greater private participation to ensure affordability and supply reliability. The current pricing distortions, it warned, are eroding industrial competitiveness and discouraging foreign investment.
A major concern raised was the excessive size of the public sector. Sri Lanka employs over 1.5 million government workers nearly 13 of its labor force one of the highest ratios in Asia. Yet, productivity remains dismal. Many state agencies operate with overlapping functions and little accountability.
Despite low wage levels, the overall wage bill consumes almost half of government recurrent expenditure, crowding out spending on health, education, and capital projects. The World Bank recommended “rightsizing” the bureaucracy through rationalization, skill-based recruitment, and performance-based evaluations.
The delegation also called for reforms in the Public-Private Partnership (PPP) framework, emphasizing that PPPs, if designed transparently, could deliver infrastructure and services without resorting to wholesale privatization.
However, Sri Lanka’s recent PPP record has been marred by allegations of corruption, opaque tendering, and politically driven decision-making particularly in transport and renewable energy projects. The World Bank urged stronger regulatory oversight and independent evaluation mechanisms to restore investor confidence.
Committee Chairs including Dr. Harsha de Silva, Dr. Nishantha Samaraweera, and Kabir Hashim acknowledged the need for urgent reform, pledging to strengthen oversight in revenue collection, employment creation, and public accountability.
As Sri Lanka seeks recovery under IMF-backed reforms, the World Bank’s message was clear: without tackling energy inefficiencies, an overstaffed public sector, and corrupt PPP structures, the country risks trapping itself in a cycle of stagnation and fiscal distress.
