Sri Lankan construction ‘in crisis’

By Leila Steed01 September 2022

Construction contractors in Sri Lanka are said to be in financial crisis, due to the country’s government still owing around LKR150 billion (US$416.7 million) in costs for work already carried out, and a ban on building material imports now effect.

According to local media reports, two years of money printing and a collapse of the nation’s currency has resulted in a severe economic downturn, with the Central Bank of Sri Lanka recently reporting a 64% year-on-year rise in inflation for the month of August 2022.

Susantha Liyanaarachchi, head of the National Construction Association of Sri Lanka (NCASL), said, “Even though many projects were started during the previous government, due to not being able to complete the payments, the whole construction industry is in a great financial crisis.”

The NCASL says that work on many highway, road and other infrastructure projects has stopped as the Sri Lankan Government cannot afford to complete them unless it increases state revenue. The association’s former President claims that up to 70% of state project are on hold.

Added to that, the temporary import ban is believed to include industrial machinery and building materials such as aluminium, tiles and water pumps.

It came into effect on 23 August 2022, as an attempt by the government to help ease the country’s post-pandemic financial crisis.

Although Liyanaarachchi says that the difficult construction climate is mainly a result of the debt owed to contractors by the government, the cost of raw materials, fuel and the depreciation of the Sri Lankan rupee is also making it increasingly difficult for contractors to price up new projects and to meet existing project budgets.