Sri Lanka needs to move away from public underinvestment, says Deloitte SL and Maldives

• Global audit firm hopeful for a period of productive and rapid economic growth

Ruvini Fernando

By Shannine Daniel
Sri Lanka needs to overcome the issue of underspending that has taken place in the recent past, as it is looking at a very ambitious programme of capital expenditure for next year, said Deloitte Sri Lanka and Maldives Head of Risk and Transactions Strategy Ruvini Fernando, at a recent post-budget discussion.
Over the past few years, the country has not allocated enough funds for important areas that would drive growth, such as health, education and public infrastructure and investments in these sectors have been below its peer countries, Fernando noted. 
“This was mainly because Sri Lanka had many rigid payments to make, especially interest payments. With the economy developing and tax revenue increasing, we are hoping that investments will be made in these key sectors, for future development,” she said.
In his second reading of the national budget proposals for 2026, President Anura Kumara Dissanayake emphasised on public investments being maintained at 4 percent of GDP in future. 
“When we have to meet budgetary targets and now the International Monetary Fund primary surplus target of 2.3 percent of GDP, we tend to cut expenditure by cutting public investments on vital infrastructure,” Fernando stated.  
Fernando also noted that public investments alone would be inadequate to achieve the president’s target of 7 percent economic growth by mid-2026. She commended his decision to encourage more public-private partnerships (PPPs). 
“PPPs are possible in almost all sectors of public investment and other countries have adopted these models successfully. Sri Lanka, despite not having a PPP law yet, has also been successful in executing PPPs such as for electricity provision and ports,” she stated, adding that the Colombo Port’s terminals that were developed via PPPs presently account for about 69 percent of shipment volumes.
The new budget proposals also highlighted the government’s commitment to bring in the new PPP law early next year, which would enforce a transparent framework to improve investor confidence. 
Fernando hoped that the new law and subsequent guidelines would enable the public and private sectors to clearly set out their abilities when carrying out long-term projects via PPPs.
She also called for more sustainable and responsible practices via long-term partnerships and said PPPs should also be supported by good feasibility studies, environmental and social impact assessments and careful study of the impact on public finance.
According to Deloitte’s 2026 Budget Analysis Report, the latest budget called for significant allocations for health, education, agriculture, fisheries, transport, logistics, infrastructure, digital economy and exports, coming up to about Rs.1.4 trillion.