By: Staff Writer
October 25, Colombo (LNW):President Anura Kumara Dissanayake’s disclosure that a Finance Ministry committee is examining the closure or amalgamation of 34 State-owned enterprises (SOEs) signals a potentially significant shift towards reducing institutional waste and improving public-sector efficiency. The initiative, coupled with plans to increase capital expenditure to Rs. 2 trillion next year, presents an opportunity to redirect scarce resources towards productive investment.
However, the success of the proposed restructuring will depend on whether the Government confronts the causes of institutional inefficiency rather than treating closures and mergers as achievements in themselves.
Addressing the 100th Annual Conference of the Government Surveyors’ Association, the President blamed past political appointments for excessive staffing at lower levels of the public service. He said the Government wanted to establish an attractive public service staffed by capable and highly qualified professionals.
The criticism highlights a longstanding governance problem: politically motivated recruitment can increase recurrent expenditure while weakening merit-based administration. Yet, reform must be supported by institution-by-institution assessments of staffing, productivity, financial performance and public-service obligations.
Not every loss-making State enterprise is necessarily redundant. Some provide essential services or support national infrastructure, while others may have been weakened by political interference, poor management, excessive borrowing or procurement failures. Closing viable institutions because of temporary financial difficulties could undermine public services and destroy productive capacity.
The Government should therefore publish the criteria used to identify the 34 enterprises, together with assessments of their liabilities, employment implications and future options. Where restructuring is justified, independent valuations, transparent merger arrangements and parliamentary scrutiny would help prevent public assets from being transferred or disposed of without adequate accountability.
The President’s investment plans raise another important question: whether Sri Lanka can expand development spending without recreating the financial vulnerabilities that contributed to its economic collapse.
Capital expenditure is expected to rise from Rs. 1,330 billion this year to Rs. 2 trillion in 2027. The President said major road projects, including the Kurunegala-Galewela, Rambukkana-Galagedara and Kahathuduwa-Ingiriya expressways, were being financed through domestic Treasury resources rather than dollar borrowing.
The Government also plans to begin a railway electrification project in the Kelani Valley, estimated to cost Rs. 600 billion, next year.
These investments could improve connectivity, reduce transport inefficiencies and support economic activity. However, the availability of rupees does not eliminate the need for foreign exchange. Imported machinery, steel and other materials require dollars, placing additional demands on an economy already facing higher oil-import costs.
Project selection must consequently be based on credible feasibility studies, economic returns, environmental assessments and realistic implementation schedules. Independent monitoring is essential to prevent cost overruns, delays and politically motivated allocations from undermining the benefits.
Public-sector remuneration presents another structural challenge. The President said the three-phase basic salary increase provided for in the 2025 Budget would add Rs. 330 billion to the annual salary bill by 2027 compared with 2024. He indicated that allowances could receive greater consideration in the 2028 Budget, when no further basic salary increase is planned.
The challenge is to balance fair remuneration with fiscal sustainability while retaining engineers, information technology specialists and other professionals needed to modernise the State.
The proposed reforms should therefore be judged by measurable outcomes: lower administrative waste, stronger professional capacity, improved services and better returns on public investment.
Sri Lanka’s fiscal recovery offers an opportunity to rebuild the State around efficiency and accountability. But the Government must demonstrate that institutional restructuring and ambitious spending plans are guided by evidence, transparent procurement and public interest rather than political convenience.
