The government is moving swiftly to overhaul State-Owned Enterprises (SOEs) through a new Public Commercial Businesses Bill, designed to improve management, enforce financial discipline, and enhance transparency in the sector.
The draft bill, prepared under the guidance of the Public Enterprises Department (PED), has received policy approval from the Cabinet of Ministers. The proposed legislation seeks to clamp down on corruption and introduce governance reforms, according to a Sunday Times Business report dated February 16, 2025.
SOEs have traditionally operated under laws such as the Government-Sponsored Corporations Act and the Finance Act No. 38 of 1971. However, the new reforms aim to modernize the framework—introducing a holding company model to strengthen corporate governance and reduce the Treasury’s direct control and financial obligations.
Cabinet Spokesman Dr. Nalinda Jayatissa highlighted the urgency of SOE reform, warning that ongoing mismanagement could continue to drain public finances. The bill proposes appointing professional experts to SOE boards to boost accountability.
A special ministerial committee, led by Labour Minister Anil Jayantha Fernando and including Ministers Sunil Handunnetti and Wasantha Samarasinghe, has been tasked with reviewing the draft and providing recommendations.
These reforms are a critical component of Sri Lanka’s agreement with the International Monetary Fund (IMF) under the US$2.9 billion Extended Fund Facility (EFF). During an April 29 virtual briefing, IMF Mission Chief Evan Papageorgiou confirmed that SOE restructuring is central to the country’s economic recovery strategy.
He noted the government is developing a medium-term plan to ensure the operational sustainability of SriLankan Airlines and resolve its legacy debt. The 2025 budget has allocated Rs 20 billion to repay the airline’s loans, and an advisor has been appointed to manage international bond restructuring.
The EFF program also introduces fiscal controls, including limits on Treasury guarantees and restrictions on foreign currency borrowing by non-financial SOEs with limited FX revenue, aiming to curb future fiscal risks.
Despite the momentum, some major restructurings remain stalled. These include SriLankan Airlines, Mattala Airport, Hilton Colombo, Litro Gas, and Sri Lanka Telecom. Out of 430 state enterprises previously listed, 50 were targeted for restructuring or privatization by March 2023.
