Cyclone Ditwah has done more than damage physical infrastructure it has exposed the limits of Sri Lanka’s public financing model. With reconstruction costs mounting and fiscal space severely constrained, policymakers are being pushed toward capital market solutions that have long been discussed but rarely executed at scale.
At the centre of the debate is the proposal to issue infrastructure bonds to fund rebuilding. Advocates argue that such bonds could channel long-term domestic savings into productive assets, easing pressure on the national budget. For investors, infrastructure-backed instruments promise predictable returns tied to essential services, offering an alternative to volatile equity markets.
Yet the cyclone recovery also reveals why Sri Lanka’s capital market remains underutilised. Despite more than 200,000 registered companies nationwide, fewer than 300 are listed on the CSE. Public participation is minimal, with only about 60,000 active trading accounts in a population of over 22 million. This narrow base limits the market’s capacity to absorb large bond issuances.
Regulators see the crisis as a catalyst for reform. Plans are underway to introduce new investment instruments, including digital asset-based products within a regulated framework, aimed at attracting younger and tech-savvy investors. While digital currencies remain under the Central Bank’s authority, digital securities could improve settlement speed and transparency if carefully implemented.
However, trust remains a fragile commodity. Recent warnings by regulators about unauthorised entities soliciting funds outside the regulated system underscore the risks facing retail investors. Any push to fund reconstruction through markets must be matched with strong enforcement and public education to prevent abuse.
Cyclone Ditwah may ultimately force Sri Lanka to confront long-standing weaknesses in its financial architecture. Infrastructure bonds can play a meaningful role—but only as part of a broader effort to deepen markets, strengthen governance and rebuild confidence alongside bridges and railways.
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