By: Staff Writer
December 07, Colombo (LNW): Sri Lanka’s post-cyclone recovery now hinges on a critical financial debate: whether the Government’s newly presented relief plan—outlined by the President in Parliament—can realistically rebuild homes, livelihoods, and the vast public infrastructure destroyed by Cyclone Ditwah and subsequent floods and landslides. The Government insists its allocations are adequate, yet mounting evidence and parliamentary scrutiny paint a more uncertain picture.
During the debate on compensation and rebuilding support, Committee on Public Finance Chair Harsha de Silva urged the administration to divert Rs. 500 billion—currently earmarked for the retirement of treasury bills in 2026—towards urgent reconstruction. He argued that the Treasury has the legal and fiscal flexibility to postpone debt retirement, particularly when thousands of families remain displaced and economic activity in several districts has ground to a halt.
According to de Silva, the Government had originally advised banks to maintain over Rs. 1 trillion in emergency reserves. However, only half of that amount has been set aside for debt payments. “This is clearly not the moment to prioritise reducing a decimal fraction of interest,” he cautioned, emphasising that every rupee now should support rebuilding homes, restoring livelihoods, and compensating businesses—especially MSMEs facing a debt burden approaching Rs. 1 trillion after years of economic volatility.
The President’s financial plan includes allocations for house repair grants, livelihood assistance, and emergency clean-up operations. Yet, questions loom over whether the proposed spending matches the scale of destruction. Initial government estimates place total losses between $3 billion and $6 billion, but no definitive assessment has been issued. A World Bank-led damage evaluation is expected within two weeks, likely to provide the first credible figure. If losses are closer to $6 billion (about Rs. 2 trillion), current allocations appear far from adequate.
Compounding concerns is the Public Financial Management Act, which sets a primary expenditure ceiling of 13% of GDP for 2026 in line with IMF commitments. While de Silva acknowledged this limit, he pointed out that the law allows exceeding the cap during emergencies—making expanded public spending legally permissible if the Government chooses to act decisively.
Meanwhile, around Rs. 50 billion remains unspent from the 2025 Budget’s emergency funds. De Silva argued these could be mobilised within weeks for immediate relief. He also criticised the standard Rs. 25,000 compensation payment as outdated, suggesting it be doubled given recent inflation, rising construction costs, and the severe material shortages in flood-affected districts.
The President’s plan aims to restore normalcy, but without clearer damage assessments, transparent budget priorities, and a willingness to adjust fiscal commitments, Sri Lanka risks underfunding its recovery at the very moment citizens need the State most.
