Sri Lanka’s highly publicised state-sector reform drive once championed as a cornerstone of economic recovery is now under sharp scrutiny after a new audit revealed widespread delays, missing documentation and a growing burden of unmonitored liabilities across dozens of state-owned enterprises (SOEs).
The Auditor General’s Department has warned that the reform process is failing to deliver on its promise, leaving the public sector weighed down by “ghost entities” that continue to drain state resources.
Government records show 30 public companies and two public corporations officially classified as “non-operative.” However, the audit found that even the most basic information on many of these entities such as formal resolutions, financial statements, and in some cases their full identity remains unavailable.
This opacity has effectively turned them into untracked fiscal liabilities, making it impossible to determine the true financial exposure to the state.
For example, the Sri Lanka Rubber Manufacturing & Export Corporation (SLRMEC) has ceased operations and leased its Elpitiya foam-rubber factory, while the Co-operative Wholesale Establishment (CWE) retired all its staff by September 2023.
Yet despite being non-functional, several SOEs have not begun the legally required liquidation process. As of 31 July 2024, only four of the twelve entities slated for closure had formally entered liquidation, while six remained in complete limbo.
Compounding the problem, the audit highlights major data gaps. Even identifying all twelve dormant entities proved challenging. Well-known loss-making SOEs such as the Janatha Estates Development Board (JEDB) and the Sri Lanka State
Plantations Corporation (SLSPC) appear on various dormant lists, while lesser-known companies, including Lanka Cement Corporation Ltd, Selendiva Investments Ltd, and Magampura Ports Management Company (Pvt) Ltd, are still awaiting closure decisions.
The fiscal consequences are significant. A separate government study cited in the audit found that 20 SOEs incurred Rs. 850 billion in combined losses, and auditors warn that even a fraction of this attributable to non-operating entities represents a substantial drain on public finances.
The report stresses that dormant SOEs are “not inert they continue to carry costs, liabilities and opportunity losses,” despite contributing nothing to the economy.
The Ministry of Finance, identified as the key authority responsible for implementing closures, faces criticism for prolonged delays that “speak volumes about implementation failure.” As the country works to rebuild fiscal credibility under an IMF-supported programme, the continued presence of these ghost entities undermines reform momentum and risks eroding investor confidence.
The Auditor General recommends swift corrective action, including:
- Publishing a complete, updated list of dormant SOEs with recent financial data;
- Assigning each entity a clear exit path—revival, merger or liquidation—with strict timelines;
- Initiating and completing all pending liquidation processes without further delay.
Until these steps are taken, Sri Lanka’s dormant SOEs will remain a silent but costly burden, symbolising the widening gap between reform rhetoric and real execution.