In a major shift that could cripple Sri Lanka’s grassroots governance, it has been revealed that the central government will be forced to halt funding for local councils by 2028 under new terms dictated by the International Monetary Fund (IMF).
Dr. Sujatha Gamage, Co-Coordinator of the Sri Lanka Education Forum, stated that the IMF’s debt restructuring program includes a condition requiring the government to stop disbursing funds to local government institutions for employee salaries and recurring expenses within the next three years. These allocations, which currently flow from the national budget through the Ministry of Local Government and Provincial Councils, are vital for the day-to-day functioning of municipal and urban councils.
Under the current system, central funds ensure that provincial councils are able to support local bodies in paying their employees and keeping basic services running. But as Sri Lanka moves into the repayment phase of its restructured debt, that financial support is set to be withdrawn completely, leaving local governments scrambling for survival.
Minister of Provincial Councils and Local Government, Dr. Chandana Abeyratne, confirmed that the IMF had communicated this requirement in prior negotiations, and that discussions have already taken place regarding the looming cut-off. However, he also noted that during the most recent round of talks with the IMF held in Sri Lanka, this issue was not raised again—perhaps signaling either a delay in implementation or a shift in approach.
Still, the warning has been issued. And unless Sri Lanka’s local councils find alternative revenue streams by 2028, they may face financial collapse.
