Financing Sri Lanka's electricity sector growth and transition

Fears and misconceptions vs. rational realism

- By Chanaka Wickramasuriya (CFA)

SRI Lanka's electricity sector needs considerable transformation. Its structure, culture and technologies are archaic. It is not conducive to delivering the dynamism, competitiveness and efficiencies that a modern economy and consumer demands.

The 2024 Act was to set the path and journey towards achieving this, and the proposed 2025 Amendments arguably stifle this process. In whatever form the sector emerges, post the parliamentary debate and vote on the Amendments scheduled for 6 August, the sector is going to require considerable investment to meet whatever objectives the Government ends up with¹. This article will focus on the challenges, limitations and sometimes incorrect notions associated with generating the required investment and argue why this investment needs to be both private sector driven, and foreign sourced.

To start with we need to recognise that the State has little to no fiscal space for investment. Even the 2024 fiscal targets set under the IMF program were met partly by limiting Capital Expenditure to levels lower than originally budgeted². The Successor Entities that emerge from the CEB's restructuring, and that will continue to be State owned, will also have very limited ability to borrow beyond their carved-out balance sheets as any further project debt will be deemed as de-facto sovereign guaranteed for overall State debt calculations.