Treasury cash returns halve as SOE levies plummet; eyes set on Rs. 98bn recovery in 2026

• Contribution of levies and dividends to Treasury drops to Rs. 14.6 bn in first eight months
• Paper profits of Rs. 307.5 billion masked by heavy reliance on state banks; energy and aviation sectors bleed
• Govt. projects massive turnaround with Rs. 98 bn in SOE returns estimated for 2026

By Nishel Fernando

Despite State-Owned Enterprises (SOEs) reporting a combined profit on paper, the actual cash return to the government coffers has nearly halved in 2025, signalling a tightening fiscal squeeze driven by the collapse of profitability in the energy and aviation sectors.

According to the Budget, Economic and Fiscal Position Report 2026 released by the Ministry of Finance, the collection of levies and dividends from SOEs to the Treasury plummeted to Rs. 14.6 billion in the first eight months of 2025. This is a sharp contraction from the Rs. 26.7 billion collected during the same period last year. The key 52 SOEs reported a cumulative profit of Rs. 307.5 billion for the period ending August 2025.

The primary culprit for the drying up of state dividends is the Ceylon Electricity Board (CEB). The utility giant swung from a massive profit of Rs. 144.4 billion in 2024 to a net loss of Rs. 4.9 billion in the first eight months of 2025. The Finance Ministry attributes this reversal to the reduction in end-user tariffs, which saw sales revenue per unit drop to Rs. 25.50 per kWh from Rs. 39.74 per kWh. This tariff cut eroded revenue by 32 percent to Rs. 271.5 billion, wiping out gains from lower generation costs.

Compounding the situation, SriLankan Airlines saw its financial position deteriorate significantly, reporting a net loss of Rs. 15.2 billion. The airline struggled with exchange losses amounting to Rs. 8.5 billion and rising finance costs, pushing its accumulated losses to a staggering Rs. 631.5 billion. Meanwhile, the Ceylon Petroleum Corporation (CPC) saw its net profit decline by 19 percent to Rs. 22.1 billion, driven by a 15.1 percent drop in revenue and a drastic reduction in other operating income.

The state banking sector was the primary reason aggregate SOE numbers remained in the black. The three major state-owned banks—Bank of Ceylon (BoC), People’s Bank, and National Savings Bank (NSB)—collectively improved their profits by Rs. 69.8 billion, recording a total Profit Before Tax (PBT) of Rs. 147.1 billion. Bank of Ceylon led with a PBT of Rs. 78.7 billion, while People’s Bank recorded Rs. 37.8 billion, buoyed by increased net interest income.

The report also highlighted the immense liability burden facing the state. The outstanding stock of Treasury Guarantees and Letters of Comfort issued for SOEs stood at a staggering Rs. 1.38 trillion as of August 31, 2025. Additionally, the CPC reported a 38 percent rise in outstanding trade debt to Rs. 13.7 billion, while the CEB held trade payables of Rs. 36.7 billion, largely owed to independent power producers.

Looking ahead, the government is projecting a massive recovery in SOE contributions for the fiscal year 2026. According to Ministry of Finance estimates, the total collection from levies and dividends is expected to surge to Rs. 97.9 billion. Projected levies for 2026 are estimated at Rs. 83.0 billion, with projected dividends reaching Rs. 14.9 billion.

Key contributors to this ambitious target include the Telecommunications Regulatory Commission (TRC), which is projected to contribute Rs. 10 billion, and the state banks, with Bank of Ceylon and People’s Bank expected to contribute Rs. 18.6 billion and Rs. 12.1 billion in levies respectively. The Ceylon Petroleum Corporation is also projected to contribute Rs. 10.7 billion in levies, assuming a stabilisation in its operational performance.