Sri Lanka faces a staggering Rs 40 billion compensation demand from international and local contractors after suspending major infrastructure projects due to its 2022 economic crisis. With daily penalty claims and looming interest hikes, the financial fallout could worsen.
Contractors Demand Rs 40 Billion as Sri Lanka Faces Fallout from Suspended Infrastructure Projects
Sri Lanka’s post-bankruptcy economic challenges continue to mount, as contractors involved in key development projects have now demanded compensation exceeding Rs 40 billion. These claims come after the suspension of massive infrastructure works following the island’s economic collapse on April 12, 2022.
According to top-level government sources, the Ministry of Finance has received formal compensation requests from three major companies: China’s MCC, Japan’s Taisei Corporation, and Sri Lanka’s Access Group. The halted projects include the Kadawatha–Mirigama segment of the Colombo–Kandy Expressway, the new terminal at Katunayake International Airport, and the Kohuwala Flyover.
The largest claim reportedly comes from the Chinese contractor responsible for the expressway, which is demanding a daily compensation of Rs 2 million since the project was paused.
But what worries officials even more is not just the compensation but the demand for increased interest rates on previously agreed funding. The original interest rate of 2% is now being renegotiated by the contractors, who insist that the cost of restarting these projects especially after long delays must account for current global financial realities.
An increase in interest rates will significantly inflate Sri Lanka’s debt servicing burden, adding to the already fragile state of public finances. With the country still grappling with its economic recovery plan, this latest development could derail efforts to regain global investor confidence.
Officials are currently in talks with all relevant parties, but experts warn that Sri Lanka’s credibility on the global infrastructure stage is now under heavy scrutiny.
