Sri Lanka hopes to fully utilize Rs.2,000bn capital spending next year
ECONOMYNEXT – The Sri Lankan government has adjusted its procurement cycles for development projects with the hope of utilizing the full Rs. 2,000 billion capital expenditure planned for next year, Cabinet Spokesman Nalinda Jayatissa said.
The island nation’s successive governments have failed to utilize the capital spending every year due to delays in approvals, tender process and procurements.
President Anura Kumara Dissanayake’s government has spent only less than 25 percent of the allocated Rs. 1,340 billion in the first nine months of the year, Finance Ministry officials have said.
“Spending 100 percent might not be possible in this year due to various technical reasons. In some places there were issues with tenders; in some places there were issues in the procurement process,” Jayatissa, also the minster of health and media, told reporters at the weekly Cabinet media briefing.
He said the government, however, has urged the ministries not to wait until January of next year to initiate these development projects.
“If you plan to start in January, you will only be able to actually get it underway around May,” he said.
“Now you know that funds will be allocated. The plans that respective ministries submitted to the Ministry of Finance knows about those plans. They have an idea of how much money will be spent. Accordingly, several steps including preparing plans, preparing estimates, and initiating procurement activities can be carried out even before the budget is passed.”
“(Ministries can) carry out the procurement activities, and wait until the budget is passed only to award the contract.”
“Once the budget is passed this time on December 14th, and after the Speaker signs it, generally within the month of December there is the ability to know the amount of money allocated to one’s ministry. Then, awarding can be made starting even from the first week of January, if needed.”
“It is that very process that we have granted approval for across all ministries. It is along with that that we expect to spend this 2,000 billion.”
Sri Lanka’s chronic failure to utilize its full budgetary allocations for capital investment reflects deep-rooted structural inefficiencies in public financial management and project execution, analysts and economists say.
They warn of lower economic growth in the future if the government fails to implement its planned capital investment projects.
The government has repeatedly said most of the spending occurs in the last quarter of the year.
Year after year, bureaucratic delays, protracted procurement disputes, politicized project selection, and a lack of technical expertise within line ministries leave a significant portion of capital expenditure unspent on the Treasury books.
This capital under-utilization carries severe long-term repercussions for the island’s economic trajectory.
By failing to deploy allocated funds into critical infrastructure such as transport networks, modernized power grids, and digital public systems, Sri Lanka suffers from lower productivity growth and worsening structural bottlenecks as well as a decline in overall gross domestic product (GDP) potential.
In a fragile post-default macroeconomic climate, this persistent shortfall also sends a negative signal to international development partners and private investors.
It demonstrates an institutional inability to absorb capital effectively, thereby stalling the very structural transformation required to safely out-grow a historic debt burden.
President Dissanayake last month promised to change the process to fast-track the spending. (Colombo/November 10/2026)