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Sri Lanka’s construction sector collapses making 90 percent of work standstill

Sri Lanka’s construction sector has crashed with 90 percent of their work countrywide coming to standstill risking the loss of 75 percent of the work force mainly due to shortage of cement, iron and other raw material and its high prices in the economic crisis, the National Construction Association of Sri Lanka complained.

While the broader economy contracted by 8.4 percent in the second quarter ended in June, the construction activities, which contributed an outsize 9.5 percent to the overall economic output, shrank by nearly twice as much as in the same period, indicating its importance to the Sri Lankan economy, specially in the post-war era.

According to the data released by the Census and Statistics Department, construction activities declined by a significant 16.2 percent in the April-June quarter, as the economic crisis sent ripple effects across multiple sectors.

The sputtering economy came to a near standstill in the second quarter, after the foreign exchange crisis unraveled in proportions and magnitudes, which nobody had anticipated, forcing the government to suspend almost all its big infrastructure projects.

Meanwhile, private developers scrambled to source materials such as cement and others amid their inability to find dollars to import them and soaring prices, which sent the cost of construction through the roof.

Around 900000 law income earning workers out of 1 million including 600000 direct jobs in the building construction field have already lost their livelihood greatly affecting 1.2 million poor families in the lowest income strata, the association pointed out.

Over 1000 building material suppliers had to close down owing to non availability of items like cement, iron and other essential items for construction industry such as Aluminum, tiles, water pumps, and rain water gutters included in the temporarily banned import list , a move to stop foreign currency outflow.

It also included some industrial machinery including metalworking machinery, packing machines and ball bearings, chairman of the association Susantha Liyanaarachchi told the Business Times.

Making the situation from bad to worse, the government has also suspended almost all major infrastructure projects tumbling many building contractors into severe liquidity issues without paying unsettled bills amount to Rs.150 billion.

Although many mega projects were started during the previous government, due to not being able to complete the payments, the whole construction industry is in a great financial crisis he said.

The Treasury is also compelled to pay an additional 20 percent apart from their bills in accordance with their contractual agreement due to this sudden decision of suspending mega projects,

On the other hand, contractors are estimated to owe the banking sector an enormous sum of Rs.200 billion.

Meanwhile the cement scarcity has become a major stumbling block for the construction industry, largely affecting small time contractors and workers engaged in house building and repairing at present.

Total cement usage has fallen 19 percent to 2,855,000 metric tonnes during the six month period to June 2022 reflecting the gravity of the contraction in construction and impacting the country’s total economic out put, Finance Ministry data shows.

The cement imports dropped 84 percent to just 35,000 metric tonnes in June from a year ago, bringing the first six months imports to around 1 million metric tonnes, down 26.2 percent reflecting the severe foreign exchange crisis in the country.

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