Sri Lanka’s state-owned enterprises (SOEs) continue to impose mounting fiscal risks despite recent reports of aggregate profitability. The Ministry of Finance’s Budget, Economic and Fiscal Position Report 2026 reveals that government revenue from SOEs has nearly halved in 2025, even as headline profits appear positive1. This widening gap between reported earnings and actual cash transfers underscores the structural weaknesses embedded in the SOE sector.
Between January and August 2025, the government received only Rs. 14.6 billion in SOE levies and dividends, a sharp decline from Rs. 26.7 billion in the same period of 2024.Yet, Sri Lanka’s 52 major SOEs posted a combined profit of Rs. 307.5 billion by August 2025. This divergence illustrates a longstanding problem: SOE profitability often reflects accounting gains rather than real fiscal contributions.
The downturn was driven primarily by two loss-making giants, the Ceylon Electricity Board (CEB) and Sri Lankan Airlines. The CEB recorded a Rs. 4.9 billion net loss in the first eight months of 2025, reversing its Rs. 144.4 billion profit from the previous year. Sri Lankan Airlines’ losses deepened to Rs. 15.2 billion, with accumulated losses reaching Rs. 631.5 billion, driven by exchange rate pressures and rising finance costs. Meanwhile, the Ceylon Petroleum Corporation (CPC) reported a 19% decline in profit to Rs. 22.1 billion, reflecting lower revenue and reduced operating income.
Not all SOEs contributed negatively. The state banking sector; Bank of Ceylon, People’s Bank, and National Savings Bank was critical in sustaining overall profitability, increasing collective profit before tax to Rs. 147.1 billion, with Bank of Ceylon contributing Rs. 78.7 billion. However, these financial gains have not been sufficient to offset the structural weaknesses of the larger loss making utilities.
Beyond profit and loss, the state’s liability exposure has grown considerably. Treasury Guarantees and Letters of Comfort issued to SOEs reached Rs. 1.38 trillion by August 2025. These commitments limit fiscal space, heighten refinancing pressures, and increase the vulnerability of the broader public sector.
The government anticipates a recovery in 2026, projecting Rs. 97.9 billion in SOE levies and dividends, with key contributions expected from the Telecommunications Regulatory Commission (Rs. 10 billion) and state banks, including Bank of Ceylon (Rs. 18.6 billion) and People’s Bank (Rs. 12.1 billion). However, without deeper structural reforms, such projections remain uncertain. Persistent operational inefficiencies, political intervention in pricing, weak financial controls, and opaque governance continue to hinder the sector’s ability to deliver stable returns.
Taken together, these findings reinforce the case for comprehensive SOE reform. Addressing governance failures, rationalising pricing mechanisms, improving transparency, and strengthening oversight are essential if SOEs are to transition from fiscal liabilities into commercially viable institutions. The 2025 data makes clear that surface-level profits do not translate into fiscal stability. Without structural change, the state will remain exposed to growing hidden liabilities and recurring cycles of financial stress.
1 Budget, Economic and Fiscal Report, Ministry of Finance. 2026. Available at https://www.treasury.gov.lk/si/api/file/1aab9cb7-e765-444f-82a0-9e6159d4048f
