As Sri Lanka pushes ahead with its IMF-aligned economic restructuring agenda, new audit revelations on dormant state-owned enterprises (SOEs) and a series of strategic decisions on plantations and the national airline are sharpening the spotlight on the depth of the country’s public-sector reform challenge.
A recent report by the Auditor General’s Department has exposed a striking accountability gap across the state enterprise landscape, identifying 30 public companies and two public corporations as “non-operative” as at 30 July 2024. Despite being effectively defunct, these entities remain on the Treasury’s books with scant documentation on their status, financials, assets or liabilities—creating what auditors describe as “untracked fiscal risks”.
In several cases, operations have quietly ceased—Sri Lanka Rubber Manufacturing & Export Corporation (SLRMEC), for instance, had shut down its facilities and leased its Elpitiya foam-rubber factory, while the Cooperative Wholesale Establishment (CWE) had fully retired its staff by September 2023. Yet, formal liquidation procedures have not been initiated, even when the boards of these companies have approved dissolution. By July 2024, only four of 12 SOEs earmarked for closure had entered the liquidation process, with little clarity on the remainder.
The list of dormant enterprises includes long-struggling plantation and manufacturing entities such as the Janatha Estates Development Board (JEDB), Sri Lanka State Plantations Corporation (SLSPC), Lanka Cement Corporation Ltd., Selendiva Investments Ltd., and Magampura Ports Management Company (Pvt) Ltd.
The audit warns that these “ghost entities” continue to accumulate liabilities, incur administrative costs, and forgo revenue opportunities. A referenced government study estimates that 20 SOEs have collectively incurred losses of around Rs. 850 billion, a portion of which is believed to relate to non-operational or commercially unviable entities. Auditors stress that the Ministry of Finance bears a “huge responsibility” to fast-track closure or restructuring, with inaction signaling systemic implementation failures.
Government Moves to Exit Plantation Management
Parallel to the audit’s findings, the government is accelerating its exit from loss-making state plantations—another long-standing fiscal burden.
President Anura Kumara Dissanayake has repeatedly stated that the State can no longer sustain the heavy losses of managing plantations. In early September, the Ministry of Plantations invited Expressions of Interest (EOIs) from investors to lease and commercially utilise land and facilities belonging to JEDB, SLSPC, and Elkaduwa Plantations Ltd. (EPL). The JEDB has also placed a public call for investors to develop its lands, warehouses, offices and tea factories across the country, with parcels available in the Central, North-Western, Southern, Sabaragamuwa and Western provinces.
These entities have struggled for decades with financial instability and unresolved employee benefit payments. By 2019, unpaid EPF, ETF and gratuity liabilities of JEDB, SLSPC and EPL had reached Rs. 1.88 billion, while JEDB alone recorded losses of Rs. 372 million in tea operations and Rs. 6 million in rubber in 2020.
The leasing-out model marks a shift from earlier privatisation attempts and aligns with the government’s broader aim to reduce fiscal exposure while encouraging private-sector-led development of underutilised state assets.
SriLankan Airlines: Reform Within State Ownership
State-sector reform is also unfolding at SriLankan Airlines, though in a markedly different direction. In his 2026 budget speech, President Dissanayake signalled that the government would continue supporting the national carrier’s internal turnaround plan—while keeping alternative options open if results fall short.
The airline’s five-year strategic plan, focused on rebuilding the fleet and expanding the network, has begun yielding improvements. Operating expenses dropped to Rs. 333.5 billion in 2023/24 from Rs. 444.5 billion the previous year, and net finance costs declined by Rs. 13.6 billion. Debt restructuring efforts are ongoing, including negotiations on the unpaid US$175 million sovereign-guaranteed international bond, under the guidance of financial adviser Lazard Frères and legal advisor Norton Rose Fulbright.
The government has so far infused Rs. 6.3 billion in equity support to stabilise liquidity. While previous administrations pursued full or partial divestment—including the State-Owned Enterprise Restructuring Unit’s failed attempt to attract bidders in 2023—President Dissanayake has emphasised the strategic importance of the airline and rejected immediate privatisation.
“A solid plan has been presented and they have made us believe the airline can be rebuilt,” he told Parliament. “So far, no one has sought to acquire it. For it to be sold, the airline has to be further modernised from its existing state.”
Reform Momentum Under the IMF Programme
Viewed together, the audit findings, plantation reforms and airline restructuring underscore the complexity of Sri Lanka’s state-sector realignment at a time when fiscal discipline, transparency and efficient asset utilisation remain central to the country’s commitments under the IMF programme.
The Auditor General has issued clear recommendations to reinforce reform momentum:
Publish a complete, updated list of all dormant SOEs along with audited financials.
Assign each entity a clear status—revive, merge or liquidate—with binding timelines.
Start liquidation proceedings without further delay for entities approved for closure.
As Sri Lanka works to restore debt sustainability, attract investment and stabilise public finances, dormant SOEs and long-loss-making state assets remain critical pressure points. Addressing these—through transparent closures, leasing models, or structured internal reforms—will be essential to proving that the government’s reform agenda is not only well-designed but also deliverable.
As Sri Lanka pushes ahead with its IMF-aligned economic restructuring agenda, new audit revelations on dormant state-owned enterprises (SOEs) and a series of strategic decisions on plantations and the national airline are sharpening the spotlight on the depth of the country’s public-sector reform challenge.
A recent report by the Auditor General’s Department has exposed a striking accountability gap across the state enterprise landscape, identifying 30 public companies and two public corporations as “non-operative” as at 30 July 2024. Despite being effectively defunct, these entities remain on the Treasury’s books with scant documentation on their status, financials, assets or liabilities—creating what auditors describe as “untracked fiscal risks”.
In several cases, operations have quietly ceased—Sri Lanka Rubber Manufacturing & Export Corporation (SLRMEC), for instance, had shut down its facilities and leased its Elpitiya foam-rubber factory, while the Cooperative Wholesale Establishment (CWE) had fully retired its staff by September 2023. Yet, formal liquidation procedures have not been initiated, even when the boards of these companies have approved dissolution. By July 2024, only four of 12 SOEs earmarked for closure had entered the liquidation process, with little clarity on the remainder.
The list of dormant enterprises includes long-struggling plantation and manufacturing entities such as the Janatha Estates Development Board (JEDB), Sri Lanka State Plantations Corporation (SLSPC), Lanka Cement Corporation Ltd., Selendiva Investments Ltd., and Magampura Ports Management Company (Pvt) Ltd.
The audit warns that these “ghost entities” continue to accumulate liabilities, incur administrative costs, and forgo revenue opportunities. A referenced government study estimates that 20 SOEs have collectively incurred losses of around Rs. 850 billion, a portion of which is believed to relate to non-operational or commercially unviable entities. Auditors stress that the Ministry of Finance bears a “huge responsibility” to fast-track closure or restructuring, with inaction signaling systemic implementation failures.
Government Moves to Exit Plantation Management
Parallel to the audit’s findings, the government is accelerating its exit from loss-making state plantations—another long-standing fiscal burden.
President Anura Kumara Dissanayake has repeatedly stated that the State can no longer sustain the heavy losses of managing plantations. In early September, the Ministry of Plantations invited Expressions of Interest (EOIs) from investors to lease and commercially utilise land and facilities belonging to JEDB, SLSPC, and Elkaduwa Plantations Ltd. (EPL). The JEDB has also placed a public call for investors to develop its lands, warehouses, offices and tea factories across the country, with parcels available in the Central, North-Western, Southern, Sabaragamuwa and Western provinces.
These entities have struggled for decades with financial instability and unresolved employee benefit payments. By 2019, unpaid EPF, ETF and gratuity liabilities of JEDB, SLSPC and EPL had reached Rs. 1.88 billion, while JEDB alone recorded losses of Rs. 372 million in tea operations and Rs. 6 million in rubber in 2020.
The leasing-out model marks a shift from earlier privatisation attempts and aligns with the government’s broader aim to reduce fiscal exposure while encouraging private-sector-led development of underutilised state assets.
SriLankan Airlines: Reform Within State Ownership
State-sector reform is also unfolding at SriLankan Airlines, though in a markedly different direction. In his 2026 budget speech, President Dissanayake signalled that the government would continue supporting the national carrier’s internal turnaround plan—while keeping alternative options open if results fall short.
The airline’s five-year strategic plan, focused on rebuilding the fleet and expanding the network, has begun yielding improvements. Operating expenses dropped to Rs. 333.5 billion in 2023/24 from Rs. 444.5 billion the previous year, and net finance costs declined by Rs. 13.6 billion. Debt restructuring efforts are ongoing, including negotiations on the unpaid US$175 million sovereign-guaranteed international bond, under the guidance of financial adviser Lazard Frères and legal advisor Norton Rose Fulbright.
The government has so far infused Rs. 6.3 billion in equity support to stabilise liquidity. While previous administrations pursued full or partial divestment—including the State-Owned Enterprise Restructuring Unit’s failed attempt to attract bidders in 2023—President Dissanayake has emphasised the strategic importance of the airline and rejected immediate privatisation.
“A solid plan has been presented and they have made us believe the airline can be rebuilt,” he told Parliament. “So far, no one has sought to acquire it. For it to be sold, the airline has to be further modernised from its existing state.”
Reform Momentum Under the IMF Programme
Viewed together, the audit findings, plantation reforms and airline restructuring underscore the complexity of Sri Lanka’s state-sector realignment at a time when fiscal discipline, transparency and efficient asset utilisation remain central to the country’s commitments under the IMF programme.
The Auditor General has issued clear recommendations to reinforce reform momentum:
As Sri Lanka works to restore debt sustainability, attract investment and stabilise public finances, dormant SOEs and long-loss-making state assets remain critical pressure points. Addressing these—through transparent closures, leasing models, or structured internal reforms—will be essential to proving that the government’s reform agenda is not only well-designed but also deliverable.
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