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Sheron
Sheron
Mar 03 2026
72Sri Lanka is spending on capital projects after conducting feasibility studies, to make sure that maximum returns are brought to the economy in multiple years, Treasury Secretary Harshana Suriyapperuma said.
In the run up to the default Sri Lanka had a macro-economist’s view of capital expenditure where money was spent like current spending to have a ‘multiplier effect’ of having immediate ‘get rich quick’ style growth which classical economists calls ‘heedless spending’, critics say.
The reason classical economists well-run governed countries promote capex (even with debt) is to fill priority needs in an economy, close gaps in infrastructure making new economic activity possible, or makes existing activity more efficient, and not for the Keynesian multiplier effect.
Due to low return projects, which made budget numbers look good and fullfil the desires of macro-economists Sri Lanka ended up with so called white elephant project with debt and interest with zero or negative returns to the economy (and therefore taxes), critics say.
Meanwhile Suriyapperuma said in 2025 Sri Lanka has achieved about 75 percent of the capex, which was one of the highest considering that the new administration had less than 12 months to act after the budget was passed.
“The most important part is the process that we adopt in order to achieve that capital expenditure,” he said at a meeting organized by the American Chamber of Commerce.
“The process of following, understanding the project readiness, availability of feasibility studies for those projects to make sure return on investment comes into the economy in the subsequent years compared to some of the approaches that was adopted in the past
“During the year in which it was spent, it was highlighted as GDP growth for capital expenditure, however no subsequent returns to the economy.
“So the processes that has been improved and adopted is to make sure that once the allocations are made in the budget, projects are ready to start those engagements and the feasibility studies have been conducted to make sure appropriate level of benefits to the citizens, to the economy and to businesses.”
Seasoned senior civil servants say Sri Lanka at one time had a committee of so-called development secretaries (secretaries of key ministries) who went through projects of line ministries and decided on the order of priority.
Later the process had deteriorated to such an extent that cabinet papers done elsewhere appeared in the hands of the secretary of the line ministry who had to sign it amid pressure from construction companies they say.
Egged on by macro-economists who wanted to higher ‘growth’ numbers the public also lapped up the projects, some of which then ended up with as white elephants or insufficient returns to the economy to finance debt.
Sri Lanka’s Ruwanpura Expressway for example is a project about which the National Physical Planning Department at one time raised concerns as it may lead to the degradation of one of the most sensitive ecological cradles of the island.
Analysts say given the landslide concerns, such projects which will expand human settlements in high elevations have to be re-evaluated rather than trying to depopulate already existing settlements at high elevations.
Some so-called capital expenditure, were injections made to loss making state enterprises year after year, which while providing short term demand, had no lasting benefit to the country.
Source: Economy Next
