Sri Lanka is in danger of running short of tsunami reconstruction funds, even if the US$ 3.2 billion pledged aid is fully utilised

Sri Lanka’s tsunami reconstruction costs have jumped by about 60 percent and the island is in danger of running short of funds, even if the US$ 3.2 billion pledged aid is fully utilised, economists from the Institute of Policy Studies said Thursday. Sri Lanka’s tsunami reconstruction costs have jumped by about 60 percent and the island is in danger of running short of funds, even if the US$ 3.2 billion pledged aid is fully utilised, economists from the Institute of Policy Studies said Thursday. Last year’s tsunami damaged over a US$ 1 billion worth of infrastructure (about 4.5 percent of GDP), but the replacement costs were estimated to be between US$ 1.5 billion to US$ 1.6 billion (7.5 percent of GDP), according to a joint study undertaken by donors in January.


The devastation, which killed over 31,000 people and displaced nearly a million, also shaved off 0.5-1.0 of the country’s gross domestic product for 2005.

But the massive reconstruction bill — which includes a shortage of land, labour and raw materials — political interference, and external shocks, have pushed costs beyond original expectations.

“Costs are up by around 60 percent since January. For instance, the government estimated around Rs. 400,000 was enough to build a house.