Debt-ridden Lanka Sathosa owes suppliers Rs. 14 billion

Sri Lanka's state-run retail chain Lanka Sathosa is facing a critical financial emergency after accumulating up to Rs. 24 billion in losses.

Trade, Commerce, Food Security and Cooperative Development Minister Wasantha Samarasinghe revealed the staggering fiscal deficit during parliamentary proceedings in Colombo, warning that years of unviable branch expansion and severe procurement imbalances have pushed the national retail network to the brink of collapse.

Official financial disclosures indicate that Lanka Sathosa owes approximately Rs. 14 billion to its suppliers, whereas physical inventory held across the entire national network is valued at a modest Rs. 5.8 billion.

Operational accounts show that out of an initial 452 retail outlets, 250 were established far from urban commercial centers without sufficient planning, resulting in continuous daily losses that fail to cover basic rental overheads.

Recent consolidation efforts have trimmed the network down to 423 branches, yet 212 locations remain chronically unprofitable.

To restore supply chain stability, authorities have blacklisted more than eight suppliers over the past three months for failing to prioritize the state enterprise.

*Proposed restructuring*

In response to the mounting crisis, the government is planning a transition toward a franchise-based business model.

Under the proposed arrangement, private operators will manage retail storefronts under the established brand, while the state corporation shifts its operational focus primarily toward bulk wholesale procurement and logistics.

The government also plans to open 25 new commercially viable outlets during 2026, alongside targeted refurbishment of key existing locations.