‘No economy can sustain construction sector entirely dependent on govt investments’: CBSL Governor

The Governor of the Central Bank of Sri Lanka (CBSL) Dr. Nandalal Weerasinghe emphasized the importance of promoting a sustainable and cost-effective construction industry in the country, highlighting key challenges and opportunities in the sector. 

Speaking at ‘Construction Expo 2025’ on Friday (14), Dr. Weerasinghe underscored the need for Sri Lanka to align with global trends in sustainable construction, integrating cost-effective energy solutions and eco-friendly building practices.

“I must say my views here are not necessarily as a Governor of the Central Bank of Sri Lanka, but as a person looking at this construction industry and how this can be developed and what the issues are. Sustainability in construction is essential, not just for new projects but also for existing buildings,” he noted.  

Dr. Weerasinghe acknowledged that the construction sector has been one of the hardest-hit industries due to multiple economic pressures in recent years including the decline in public investments, high material costs and the industry being dependent on government projects.

The CBSL Governor, who acknowledged that the government faced fiscal constraints, limiting infrastructure spending and delaying payments to contractors, said that however, the outstanding arrears had now been settled.  

“Government did not have space to spend money for public investment, specially construction that had an impact on the construction does a significant in last couple of years, plus the government inability to pay the arrears for long period. That was other issue we all recognize that has been one of the adverse impact the industry had in the past”, he expressed.

“Also the cost of materials went up significantly, partly because of the shortages in foreign exchange. As a result, the shortage had shot up the prices of construction materials, as well as depreciation of the currency, high interest rates, finance costs, those other factors. We all recognize that had an adverse impact on the industry. It’s one of the worst affected the industry because of all these factors.”

Furthermore, Dr. Weerasinghe added: “When you look at this now, I think from the overall macro factors, I’m glad…I know from the Ministry of Finance, Treasury Secretary, all the arrears were settled. Almost all the areas were settled. There’s no running arrears, I think, for last couple of months, working progress.”

“Secondly, in terms of the government allocation for the public investment, I saw in one of your publications say that is not sufficient, but what I can say, this year budget has allocated 1.3 trillion public investment, most of basically are mainly have something to do with the construction sector, I think, large component.” 

“When you look at the amount, that is a significant amount, and that probably include some of the projects that’s going to be to be resumed after suspension, especially after the crew structuring. The foreign funded projects are also going to be started. I think President made this comment in one of the forums that I was also there earlier. So, these are good positive signs. One is, I think, one thing I have been always saying, industry not to rely too much on the government’s public investment. In any country, construction is not only the government business.”

“It will have a much broader contribution throughout the economy to the private sector, to low-income people, to middle-income people, to everyone. That is why it’s important, construction industry should be much more diversified, should rely on much larger private and public part, not relying on one part. That’s what we learned. Last time, large part of construction industry developed in several decades out of the public investment. And whenever it comes to crisis of the sovereign debt, then obviously you all had the impact”, he added.

“Sri Lanka’s cost of construction is relatively higher than even comparable markets. We don’t compete with advanced countries’ cost of construction, but even in the region, countries like ours, still we all know it’s relatively high.”

While acknowledging the government’s role in facilitating infrastructure growth, he cautioned against relying solely on state funding, stating, “no economy can sustain a construction sector dependent entirely on public investment. The industry must broaden its business model, including export opportunities and private sector projects”.  

The 2025 budget has allocated Rs. 1.3 trillion for public investment, a substantial portion of which is expected to support construction, he noted, highlighting that efficient use of these funds would be critical, urging the industry to maximize output per rupee spent.  

“The second one, we all know the labor cost. Lack of skilled labor is one thing that you can’t solve within short period. That is where the role of the government is to support the enhanced skill up the available labor, and encourage bringing even industry can bring in more technology, less labor, more output.  This is something I always talk about when you look at construction site in Sri Lanka and somewhere else, number of people working in a site is relatively high in Sri Lanka.”

“Number of technologies being used in other markets are relatively higher, less labor, high technology. That’s something I think we need to move in, can’t do it. But for that, you need skilled labor, well-trained, and that also help them to have high income.”

“That’s one of the reasons why the low-skilled labor are not willing to, even educated youth are not willing to work in construction sector. They are relatively low-income. If you have a technologically equipped, more skilled labor, that is part of government. I’m glad that you have program to enhance their skills. That’s one way to address that part. This will take some time,” the CBSL Governor expressed.

Dr. Weerasinghe concluded by emphasizing the need for long-term policy reforms to make Sri Lanka’s construction sector more competitive, sustainable, and cost-efficient, expressing, “A more efficient construction industry benefits everyone—from low-income families building homes to large-scale industrial projects”.