The Hon. (Prof.) A.H.M.H. Abayarathna - Minister of Public Administration, Provincial Councils and Local Government

¶ 01 Hon. Speaker, I wish to respond to the Question submitted under Standing Order 27(2) by the Hon. (Dr.) M.L.A.M. Hizbullah as follows:

¶ 02 Through the provisions in the Municipal Councils Ordinance, Urban Councils Ordinance and other relevant statutes, Local Authorities operate mechanisms for mobilizing funds required for the provision of public utility services.

¶ 03 Local Authorities function within their jurisdictions mainly on self-generated revenue including taxes from residents. Necessary legal provisions also exist to fulfill staffing needs to increase own-source revenues (OSRs). As institutions operating as single structural units, substantially higher allocations than in previous years have been provided via the Finance Commission in 2025 for revenue and other service delivery. Likewise, the Finance Commission has agreed in principle to very substantial provisions for the 2026 Budget, and we will proceed to allocate significant amounts accordingly.

¶ 04 Not all Local Authorities have the same revenue capacity. There are Municipal, Urban and Pradeshiya Sabhas with very high revenues and strong fixed bank deposits. For example, reports indicate that the Colombo Municipal Council has around Rs. 4 billion in fixed deposits from its assets. Yet, in a Pradeshiya Sabha like Karuwalagaswewa, necessary provisions to carry out even basic functions are not available.

¶ 05 Accordingly, based on the annual budget documents of all 341 Local Authorities, our Ministry conducted a review and obtained a clear definition of their financial strength. Following that, the General Treasury provided a framework (GOD) outlining how salary-related funds should be granted.

¶ 06 Further, to increase Local Authorities’ revenues, the Regional Development Bank and other domestic sources have put in place a concessional loan scheme with very low interest to implement revenue-generating projects; Local Authorities have been informed and are implementing projects under these concessional rates. This loan scheme operates with a minimum interest rate of 4 percent. It cannot be entirely free; this is not like the Central Cultural Fund—therefore, some interest must be charged.

¶ 07 In addition, to transform all Local Authorities into strong institutions within the next four years by enhancing their revenue bases, our Ministry has earmarked Rs. 3,475 million as performance-based funding for revenue-generating projects to be provided over the next two years.

¶ 08 We have also launched a robust programme to provide annual capacity development training to officers of these institutions, measuring the performance of each authority and addressing their needs accordingly.

¶ 09 As to the point raised in the Question about IMF proposals, that is a half-truth. The proposal was to reduce Government expenditure. Expenditures of Local Authorities have been reduced accordingly over the recent period.

¶ 10 The Hon. Member also said that there have been no development projects or new investments in the North and East. However, we have seen substantial public funds channelled there under various programmes such as “Uthuru Wasanthaya” and “Nagenahira Navodaya”. According to his statement, if no productive outcomes have materialized, that is a matter of concern. He also correctly stated that irregular recruitments have been a serious issue—hirings based on personal affiliations did occur and now these institutions face severe problems.

¶ 11 We know that there were around 5,000 people’s representatives in Local Authorities, which later increased to around 8,000—an increment of about 3,000. I do not have full information whether a proper needs assessment and study were done for this increase, and that too appears to be a serious issue. In any case, there is currently a problem maintaining these institutions. The Government is intervening to provide solutions. For example, we have already commenced procurement to provide needed machinery such as backhoes and motor graders to regularize the revenue-generation process of these institutions. That will help boost their incomes. Thank you very much.