The much anticipated and delayed Local Government Elections were held, and constituents await the local government bodies to ‘get going’ and respond to their needs. People have been waiting for years to get issues close at hand in their neighborhoods addressed, But, with no clear majority for any single party in 149 local government bodies, the question of stability now looms. It seems that the Election Commission may have to rule on several such bodies to get work going, in the absence of a clear winner.

Once work begins next month, some electoral observers have pointed out that each proposal that the council requires money for will have to be approved by the members of the council through a vote. “Divisions may arise in these approvals if there is no clear majority party in a body,” they observed, adding that the local government system had been designed with the intention of removing any party-based political behaviour. “The problem of party politics intervening in the functioning of local government bodies can be avoided if the public closely monitors the bodies. The public can go and observe proposals and solutions at any time,” one observer told The Sunday Morning. Each year, the LG bodies form and pass their own budgets. For up to two years, even if the council defeats the budget, the chairperson can still present it again within 14 days and pass it, according to legislation. However, from the third year onwards, the budget must be approved by the council, and if the chair fails to obtain the required support from the council, they will lose their position of leadership. This could trigger the appointment of a second chairperson. However, if the second chair also loses the budget, the elected council will cease to exist, and the body will instead function through the administration. Local government bodies have a mandate of four years, and this period can be extended by another one year depending on the minister’s approval.

Local government (LG) bodies and their function has always been a troubled affair, mainly due to issues regarding its funding model. Sri Lanka’s current local government framework comprises 341 institutions; 29 municipal councils, 36 urban councils, and 276 pradeshiya sabhas. Historically, these authorities have been reliant on annual grants from the Central Government, allocated through the Finance Commission. These funds covered operational costs, capital development, and frequently, salaries. However, early in the economic crisis, the ‘Central Government’ began implementing a policy shift to end routine financial transfers to local authorities, compelling them to become financially independent. This major shift was first signaled in the 2023 National Budget and has since become a central element of the country’s fiscal restructuring agenda amidst a turbulent economic recovery. This move is part of broader fiscal reform designed to address the nation’s economic challenges following the 2022 financial crisis and to meet the conditions of the IMF bailout.

In the 2025 Budget, the Government introduced measures to encourage local government bodies to become self-sufficient. From January, the Central Government reduced its contribution to municipal councils’ salary payments to 80% and it is set to decrease further, with a gradual reduction in funding to urban councils as well. The objective is to promote self-financing models within local authorities over the next five years. The Government has also announced a series of initiatives. One such measure is that provincial councils are now encouraged to allocate 50% of their income towards capital expenditure for development projects, rather than limiting funds to recurrent expenses. Also, LG bodies powers have been extended. They can now permit export-oriented industries with higher capital investments and larger workforces, enhancing their ability to attract and manage significant industrial projects. The Government also plans to roll out a digital payment mechanism to streamline revenue collection for the services of local authorities. However, experts have pointed out that during the early days of the new LG bodies, the financial health of local authorities could vary widely. While some, especially those in urbanised or high-value property areas, may be able to manage, others, particularly in less-developed regions, would face significant hurdles.

As such, it is prudent for the Government to closely monitor how the new LG bodies function, and how they manage their finances. At times, intervention or extra support may be needed to ensure those who get left behind, are given the opportunity to catch up and provide the services local constituents need.