Vast majority of SL’s development projects failed to achieve objectives: FinMin

• Main reason for project failures identified as absence of comprehensive guidelines covering entire project process 

By Nishel Fernando

A vast majority of the development projects in Sri Lanka failed to achieve their objectives and ultimately have become a major source of the economic crisis that erupted in 2022.

According to a review conducted by the Treasury, a vast majority of these development projected, which were funded by both domestic and foreign sources, have failed to achieve the intended outcomes. 

“With the objectives such as achieving economic growth, preserving ecological balance and enhancing religious and social harmony, the successive governments have implemented various projects in Sri Lanka over the past few decades, funded through both local and foreign contributions.

A review of these development projects reveals that while some have achieved their intended outcomes, most have not yielded the expected results, relative to the financial resources spent,” the Finance Ministry stated in a recent circular.  “The failure to achieve the expected results from numerous development projects, funded by domestic and foreign sources, which were aimed at generating economic, social and financial benefits or to deliver these results within the planned timeframe, is a key factor contributing to Sri Lanka’s economic crisis,” it stated. 

The Management Audit Department, under the Treasury, has identified the absence of comprehensive guidelines covering the entire project process, from planning, appraisal, implementation, monitoring and completion to handing over the project, as the main reason for the project failures. 

“Although circulars and instructions have been issued by the Treasury Departments and various ministries at different times, regarding project implementation, complete guidelines had not been established,” it added. 

The Treasury listed the weakness in project identification and planning, inability to maintain continuity in the project input chain, shortcomings in accountability and management, policy instability, limited involvement of relevant stakeholders, inadequate monitoring and evaluation, neglect of environmental and social impacts, technical disruptions and changes, external influences and lack of sufficient risk management as main factors for the failure to achieve the expected outcomes or the outright failure of these projects. 

“To ensure the successful implementation of the development projects and minimise the impact of the aforementioned factors, it is crucial to foster collective agreement and cooperation among the government institutions, development partners and other stakeholders. Various government institutions have issued circulars and guidelines to provide the necessary direction for carrying out the development projects,” it stressed.  To address the gaps, the Management Audit Department has developed comprehensive project management guidelines in consultation with the related departments of the General Treasury and considering all circulars related to project implementation previously issued by those departments and addressing the current requirements.

Accordingly, the department on October 24 this year issued a fresh circular with the comprehensive project management guidelines to all ministries, departments and Provincial Councils and statutory bodies and mandated all of these entities to comply with the guidelines.

In addition, the internal auditors are also required to follow these guidelines to strengthen the internal control processes.

According to the guidelines, the unsolicited project proposals are required to be submitted via open competition, following procurement guidelines and the most advantageous proposal must be selected.

When determining the source of foreign financing, it’s advised to consider aspects such as the cost of borrowing, previous experience and procedures, conditions and the expertise of the respective lenders. The External Resources Department is to include the approved development project in the project pipeline/country partnership strategy of the relevant lending agencies.