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Govt. settles Rs.191bn outstanding amount to public project contractors

Sri Lankan government construction contractors numbering around 3000 are in an urgent need of funding for their survival have been relieved as they have received Rs. 191 billion outstanding payment for the work completed in public construction projects including buildings and infrastructure facilities.

The government has settled the majority of the arrears to the tune of Rs.191 billion to contractors and suppliers, after assuming power on August 31, last year, despite an 8 percent contraction in the economy during the year, Finance State Minister Ranjith Siyambalapitiya said.

As of August 31, last year, the government owed Rs.360 billion to various contractors and suppliers. As of January 31, 2023, the government has been able to settle 53 percent of these bills, amounting to Rs.191 billion.

The non payment of dues to contractors of public projects has resulted in widespread unemployment at present due to closing down of small and medium scale construction companies and if the delay in outstanding payments continues, it could affect the livelihoods of about 1.2 million people in the sector, Ministry of Housing and Development sources said.

Siyambalapitiya emphasized that it should be viewed as a positive development that the government was able to settle the majority of the arrears, despite the estimated 8 percent economic contraction in 2022.

According to Siyambalapitiya, the government still needs to settle Rs.169 billion in arrears. Rs.100 billion worth of outstanding bills are categorized as recurrent expenditure, while Rs.69 billion is categorized as capital expenditure.

He noted that several of these outstanding bills would be settled on a prioritized basis and it include Rs.18.9 billion worth of outstanding bills for health and medicine, Rs.19.3 billion for pensions and gratuity and Rs.12 billion for fertilizer and chemical supplies.

Upon the recommendation of a committee appointed by the Treasury secretary, the Cabinet of Ministers approved a proposal to settle the outstanding payments owed to various parties by issuing Treasury bonds.

The Ministry has already suspended the development project work and the repayment of dues to contractors but it is making arrangements to pay a sizable sum of the total amount to them by the in accordance with cash availability, a senior Treasury official disclosed.

It is also considering releasing at least Rs. 500 million from the outstanding payments to the Provincial and District level projects, to provide some relief to small- and medium-scale construction companies.

The Ministry is to formally request for funding from the Central Bank by raising the relevant cash through Treasury bills and Treasury bonds to meet any urgent financial requirements, he said.

Some of these contractors have obtained loans by mortgaging their house and property to carry out the construction work and they are now in danger of losing their homes and assets to banks, several contractors complained.

In addition, the fuel shortages and power outages have affected the efficient production process of the industry, affecting all the stakeholders, from small and medium enterprises to the self-employed.

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