CIOB requests urgent IMF attention to revive Sri Lankan construction industry

Ceylon Institute of Builders President Dr. Rohan Karunaratne (left) and Vice President Ruwan De Silva

Importance of the construction sector for economic and social recovery

The Sri Lankan construction industry is one of the largest industries in Sri Lanka, involving around one million direct employees. In total it involves around 2.6 million people both directly/indirectly. With a turnover of almost Rs. 3 trillion, according to a GlobalData report, the Sri Lankan construction industry has contributed around 9.6% to the GDP in the past.

Investing in support and funding for this sector will help contractors emerge as strong contributors to the national economy. Moreover, loan funds will circulate throughout the industry, boosting economic activities across multiple sectors, including manufacturing, transportation, and services. This will significantly support Sri Lanka’s broader economic recovery efforts and align with the IMF’s program objectives for restoring economic stability.

Despite the sector’s vital importance, it remains one of the hardest-hit industries due to the economic crisis yet has been largely neglected in recovery programs. The repercussions of inaction would be severe, potentially derailing the national economic recovery strategy.

Challenges facing the construction sector after Easter terror attacks, pandemic and economic crises

Contractors have been grappling with overwhelming debt burdens, cash flow shortages, and unsustainable financial pressures, compounded by supply chain disruptions, rising material costs, high operational expenses, and a lack of new projects due to the sudden economic collapse. In addition, the sector is facing challenges related to delayed payments on public sector projects, labour shortages, difficulties in fulfilling statutory payments (such as taxes, EPF, and ETF), and the settlement of subcontractor and supplier payments.

Furthermore, disputes have surged as contractors struggle to meet contractual obligations under extreme and unpredictable conditions. Without urgent intervention, copious small/medium and large companies and entrepreneurs are on the brink of shutdown, and vast numbers of blue-collar workers may be put out of work, in addition to the harm to national infrastructure development.

Proposed loan scheme for industry recovery

Therefore, the Ceylon Institute of Builders (CIOB) has notified the IMF of the need for low-interest loan schemes with repayment grace periods, etc. for contractors. An Infrastructure Development Bank may need to be established for this. We have requested the Government for a development bank which can absorb low-cost funding relieving weight on government.

Simultaneously it aids contractors by replacing strict financial regulation for contractors, with a soft-system and supporting infrastructure development projects, working capital for contactors, operational funding requirements, etc.

The construction industry is a cornerstone of Sri Lanka’s development and plays a pivotal role in the country’s long-term economic recovery. Given the severity of the crisis facing the construction sector, swift attention to this issue is critical for mitigating further damage to the national economy and ensuring that contractors can continue contributing to economic recovery efforts.

We believe the IMF’s expertise and support will be instrumental in designing a loan package that meets the needs of the crisis-affected contractors while ensuring the long-term viability of the construction sector. These efforts will not only stabilise the industry but also contribute significantly to Sri Lanka’s broader economic recovery strategy. CIOB has extended their full support to the IMF in this endeavour.