SRI LANKA

Sri Lanka is a unitary state with a decentralised system of governance. The central government consists of an executive presidency and a unicameral legislature. The current Constitution, ratified in 1978, introduced a proportional representation system and a powerful executive government with the president being directly elected once every six years and placed as the head of the cabinet. In October 2020, the Parliament of Sri Lanka enacted the 20th Amendment to the Constitution, which concentrated the powers vested in the Parliament in the executive, and gave expansive powers and greater immunity for the president, including the possibility to remove the prime minister and appoint any number of ministerial posts. There are 32 cabinet status ministries and over 50 state (non-cabinet status) ministries accounted for at the national level, which manage over 400 institutions (departments, authorities, boards, etc) or sectoral development agendas.

The responsibility of delivering services and implementing development programs is shared between line ministries and agencies of the central government and the ‘devolved’ government structure. The ministries act through the district (district secretariats) and divisional (divisional secretary divisions) ‘deconcentrated’ administrations at local level. The devolved subnational government structure comprises provincial councils (PCs) at the regional level and local authorities (LAs) at the municipal level, categorised as municipal councils (MCs), urban councils (UCs) and the Pradeshiya Sabhas or rural councils (PS). Subnational governments’ executive head is elected by the citizens for four-year terms. The elections of PCs and LAs are held under the regulations laid by the Provincial Councils Elections Act No. 2 of 1988 with its subsequent amendments and the Local Authorities Elections (Amendment) Act No. 31 of 2017. In October 2018, all 9 PCs dissolved after completing the ruling term but the next elections were postponed due to delays in the process for proposed amendments to the election law. LA elections were last held in 2018 and the next ones are expected to be held in 2023 as the ruling term of the local councils have been extended by one year.

The 13^th amendment to the Constitution made in 1987 constituted a turning point in the subnational governance system, as 9 elected bodies were set up in the form of PCs for the 9 provinces with devolved powers. The 341 local authorities are recognised as a subordinate level of autonomous governments under the oversight of the provincial councils. In 2017, the Local Authorities Elections (Amendment) Act No. 16 reintroduced direct elections on the basis of a ward system.

The Ministry of Public Services, Provincial Councils and Local Government (MPSPCLG) holds the responsibility for policy and legislation and retains constitutional powers to intervene in subnational affairs for purposes of national planning. Under the supervision of the MPSPCLG, the State Ministry of Provincial Councils and Local Government Affairs (SMPCLGA) performs the routine tasks of this line ministry. Periodic coordination meetings are held with the chief secretaries and provincial commissioners of all local governments in the 9 provinces to facilitate performance improvement of local councils, successful implementation of development projects funded through this ministry and formulation of local government policies with the support of key national institutions such as the Sri Lanka Institute of Local Governance and the Local Loans and Development Fund (LLDF). The SMPCLGA often holds consultations with key non-state organisations such as the Federation of Sri Lankan Local Government Authorities. The MPSPCLG has powers to create or upgrade a local council based on the recommendations of an ad-hoc committee and it may curtail or extend the term of office of any local council by maximum of one year.

TERRITORIAL ORGANISATION
MUNICIPAL LEVEL	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
24 municipal councils, 41 urban councils and 276 rural councils (Pradeshiya Sabhas)		9 provincial councils
Average municipal size: 64 279 inhabitants
341		9	350

OVERALL DESCRIPTION: Sri Lanka’s territorial organisation is composed of both devolved subnational governments and a deconcentrated administration. Devolved government institutions are the provincial councils and local authorities, which include 3 types of local governments – municipal councils (urbanised areas), urban councils (semi-urban areas) and Pradeshiya Sabhas (rural councils). On the other hand, the national government is represented through deconcentrated local administrations at the district and divisional levels.

REGIONAL LEVEL: Provincial councils (PCs) were established in 1987 and are constituted by elected members. The Constitution provides for the Parliament to allow 2 or 3 adjoining provinces to form one administrative unit. In each one, the governor, who held executive power. Governors are appointed directly by the president, and then appoint a board of ministers comprised of a chief minister and not more than 4 ministers, to aid and advise the governor to exercise their functions. The board of ministers is collectively responsible and accountable to the PC. The governor performs several important functions under the Provincial Councils Act No. 42 of 1987, on behalf of the president. PCs are vested with legislative powers to make statutes for the province, in respect of subjects assigned to it by the law. However, governors of the province must give their assent to statutes passed by a PC.

Under the Provincial Councils Act No. 42 of 1987, a chief secretary is appointed for each province by the president, with the concurrence of the chief minister of said province. The chief secretary functions as the head of the provincial administration and as the chief accounting officer according to the financial rules approved by the PC. The commissioner of local government (CLG) of each province is entrusted the charge of being the key official in the PC to guide, mentor and supervise the Las within its jurisdiction, according to the 13^th amendment to the Constitution. Under the provincial administration structure, the CLG functions under the chief secretary and reports directly to the secretary of the provincial ministry responsible for the subject of local government.

The Western province, where the capital city of Colombo is located, is the largest of the 9 provinces with about 30% of the total population of the country. The Northern province is the smallest with a population of about 1.13 million. According to the Central Bank of Sri Lanka in 2019, Western province contributes with the largest share of 39% to the national GDP and Northern province the lowest share of 4.8%.

For administrative purposes, the 9 provinces are subdivided into deconcentrated administrative units: 25 districts and 332 divisional secretariats, which are further sub-divided into over 14 000 grama niladhari divisions. The district and divisional secretariats mostly coincide with the local authorities and serve an administrative coordinating role for the central government.

MUNICIPAL LEVEL: The history of local governments in Sri Lanka, as is the case for most of South Asia, dates back to the pre-Christian era. Though local councils are not recognised as a tier of government under the existing Constitution, powers and functions of the 3 types of local authorities (LAs) are derived from the respective governing laws: municipal councils (MCs) are constituted under the legal provisions contained in the Municipal Council Ordinance No. 29 of 1947, urban councils (UCs) under the Urban Council Ordinance No. 61 of 1938, and Pradeshiya Sabhas (PS or rural councils) under the Pradeshiya Sabha Act No. 15 of 1987.

Local councillors are elected via a mixed electoral system where 60% of the members are elected through direct representation to the wards and the rest is elected based on a proportional basis. This first-past-the-post, ward-based electoral system includes a 25% mandatory quota of women in the local elected councils. Of the 4 919 wards delimited by a commission assigned by the government, 4 750 are categorised as single-member wards where and 169 are multi-member wards, in which 2 or 3 members are elected considering the multi-ethnic nature of the wards. After the election, chief executives of the LAs (mayors in the MCs and chairpersons in the UCs and rural councils) are named by the political parties with the highest number of elected councilors in the LAs. The administrative heads of the LAs, all appointed by the provincial administration, are called municipal commissioners in the MCs and secretaries in the UCs and rural councils.

Colombo Municipal Council (CMC) is the largest city in the country and oldest in the South Asia, established in 1865. CMC has a resident population of around 650 000 and a floating population of more than 500 000 per day. The average population size of MCs (other than CMC), UCs and rural councils (PS) is about 80 500; 33 700 and 61 500 inhabitants respectively.

HORIZONTAL COOPERATION: Horizontal cooperation at the subnational level mainly operates through informal mechanisms dependent on personal endeavours and leadership of both the political and administrative bodies. District Coordination Committees at the district level and Divisional Coordinating Committees at the divisional level are the formal institutional arrangements at work. Oftentimes, the central government institutions represented by the deconcentrated agencies at the district and divisional level and the devolved subnational government representatives jointly engage to facilitate planning and implementation of development activities for the citizens.

Provincial councils (PCs) derive their powers from the 9^th Schedule of the Constitution which provides for devolution of power under 3 lists: the provincial list identifies the powers of PCs; the reserved list specifies the powers reserved for the central government; and the concurrent list outlines the powers that may be exercised either by the State or PCs, following consultation with each other. The provincial and concurrent lists are not as comprehensive or all-inclusive as the reserve list. There is no clear demarcation of powers between the central and provincial governments due to a lack of legislative arrangements stipulated by the central government, which resulted in a concentration of power at the central level.

All powers and functions relating to subnational governments were devolved to the PCs in 1987 through the 13^th amendment to the Constitution, except on matters relating to the structure, form and constitution of local councils and the national policy on local governance. According to the amendment, local authorities are guaranteed the powers vested in them under the respective governing legislation. PCs are permitted to confer additional powers to local authorities but cannot take existing powers away. The existing powers are enshrined in the Municipal Councils Ordinance, No. 29 of 1947, the Urban Councils Ordinance, No. 61 of 1939, and the Pradeshiya Sabha (Rural Councils) Act No. 15 of 1987. These governing laws have since been amended to enable local authorities to respond to emerging challenges. LAs are permitted to create by-laws with the approval of higher tiers of government. Among the 3 types of local councils, responsibilities for specific services can differ according to the powers vested to them. In general, MCs have more power and responsibilities than UCs and rural councils (Pradeshiya Sabhas). For example, mayors of MCs are vested with more decision-making power in matters related to public financial management than the chairpersons of UCs and PSs.

Due to the dual governance structure of Sri Lanka (deconcentrated central government institutions and devolved subnational government institutions), overlapping responsibilities in the respective roles of different levels of government have hindered the performance of subnational governments. For instance, while police and land powers are devolved to the PCs according to the Constitution, this is not effectively in place.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Municipal level
1. General public services (administration)	Public buildings and facilities (community multipurpose buildings, cooperative societies, etc)Administration and operation of general services (shared)	Public buildings and facilities (town hall, community centres, etc)Administration and operation of general services (shared)Management of cemeteries
2. Public order and safety	Police (shared)Civil protection & emergency services (shared)	FirefightingRoad traffic control (shared)
3. Economic affairs / transports	Road networks and facilities (shared)Public transport (road) (shared)Special transport services (e.g., pupil and student transport) (shared)Support to local enterprises and entrepreneurship (shared)Agriculture, rural development, irrigation (shared)Tourism (shared)Commerce (shared)	Road networks and facilities (shared)Parking (shared)
4. Environment protection	Environment management (shared)Parks & green areas (shared)Nature preservation (shared)Noise and vibration abatement (shared)Air pollution (shared)Soil and groundwater protection (shared)Climate protection (shared)	Waste management (collection, treatment and disposal of waste)Sewerage (waste water management) (shared)Street CleaningEnvironment Management (shared)Parks & green areas (shared)Nature preservation (shared)
5. Housing and community amenities	Housing and construction (shared)Urban and land use planning (shared)	Drinking water distributionPublic lightingHousing and construction (shared)Urban and land use planning (shared)
6. Health	Hospital services (general and specialist) (shared)Primary healthcare (medical centres) (shared)Preventative healthcare (shared)Public health services (shared)	Primary healthcare (medical centres) (shared)Preventative healthcare (shared)Public health services (shared)
7. Culture & Recreation	Sports and recreation (shared)Cultural activities (shared)Cultural heritage/monuments (shared)	LibrariesSports and recreation (shared)Playgrounds (shared)
8. Education	Pre-primary education (shared)Primary education (shared)Secondary education (shared)Vocational education / training (shared)Special education (shared)Research & Development (shared)
9. Social Welfare	Social care for children and youth (shared)Support services for families of elderly and disabled people (shared)Housing subsidies/benefits (shared)

Scope of fiscal data: Provincial councils and local councils

Finance Commission and Ministry of Finance

Availability of fiscal data: Low

Quality/reliability of fiscal data: Low

GENERAL INTRODUCTION: Both the provincial councils (PCs) and local authorities (LAs) are constitutionally allowed to generate revenue by collecting local taxes, user fees and property income such as revenue from rent. In addition, intergovernmental transfers are made to both PCs and LAs as recurrent and capital grants, in-line with the recommendations of the Finance Commission. As per constitutional requirement, the government should allocate adequate funds to meet the fiscal needs of the provinces in consultation with the Finance Commission which is an independent body constituted under the 13^th amendment to the 1987 Constitution along with the formulation of PCs.

The role of the Finance Commission is to recommend and apportion funds among the provinces and LAs in order to promote balanced regional development and in this context, it performs two main functions: (i) estimate the fiscal needs of the provinces based on each of their previsions and ensure that they are in line with national policy directives and priorities and (ii) apportion such funds among the provinces with the objective of reducing regional disparities.

Subnational government expenditure by economic classification
2019	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	295	2.2%	11.1%	100.0%
Inc. current expenditure	267	2.0%	12.8%	90.5%
Compensation of employees	204	1.5%	32.8%	69.2%
Intermediate consumption	-	-	-	-
Social expenditure	-	-	-	-
Subsidies and current transfers	-	-	-	-
Financial charges	1	0.0%	0.1%	0.2%
Others	62	0.5%	42.4%	21.2%
Incl. capital expenditure	28	0.2%	5.0%	9.6%
Capital transfers	-	-	-	-
Direct investment (or GFCF)	-	-	-	-

EXPENDITURE: In 2019, only one-tenth of the total spending of subnational governments was dedicated to capital expenditure and the majority was used for recurrent expenditure. Staff expenditure at subnational government level is almost one third of public staff expenditure and accounts for 1.5% of GDP in 2019. Subnational staff expenditure shows an increase of 10% in comparison to 2018.

PCs receive funds from the central government to cover the expenses of personnel emoluments and other recurrent requirements such as repairs and maintenance of buildings and vehicles, communication expenses and routine maintenance of infrastructure. In contrast, LAs are only funded to cover the expenses of personnel emoluments and other recurrent expenses are expected to be covered by generating own revenue. In 2019, LAs used own-source revenue to cover recurrent expenditure other than salaries of permanent staff, which is equivalent to 45% of the funds transferred by the central government to provincial councils for the same purpose.

DIRECT INVESTMENT: Capital expenditure by subnational governments represents about 5% of total public capital expenditure, and accounted for 0.2% of GDP in 2019. Subnational capital expenditure shows a decrease of 25% compared to the same category in 2018.

Most capital expenditure of subnational governments are funded by capital transfers from the central government. This expenditure includes direct investments in road, office buildings, schools, hospital infrastructure. Only the Western Provincial Council (WPC) and all the 341 LAs used their own revenue sources for direct investment after allocating funds for recurrent expenses. Since revenue from own sources are inadequate to cover the required recurrent expenses in the 8 other PCs, they are unable to make direct investments.

ⓘ No detailed data available for this country

Subnational government revenue by category
2019	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	286	2.1%	16.7%	100.0%
Tax revenue	25	0.2%	1.6%	8.9%
Grants and subsidies	236	1.7%	-	82.7%
Tariffs and fees	11	0.1%	-	3.8%
Income from assets	14	0.1%	-	4.7%
Other revenues	-	-	-	-

OVERALL DESCRIPTION: Both provincial and local councils have the power to raise revenue according to the 1987 Constitution, and further provided in the Provincial Councils Act of 1987, Municipal Councils Ordinance No. 29 of 1947, Urban Councils Ordinance No. 61 of 1939 and the Pradeshiya Sabha (Rural Councils) Act No. 15 of 1987. In 2019, total revenue of subnational governments accounted for about 2.1% of the GDP and 16.7% of public revenue.

Shared-tax revenue is the main source of subnational revenue: its single largest component is the general government’s nation building tax, shared with both provincial and local governments, complemented by stamp duty, license fees and other regulatory charges. Since the 1987 constitutional amendment, provinces have been allocated a considerable number of tax and non-tax revenue sources. The amendment defines local authorities as subject assigned to provincial councils. In this way, the fiscal needs of local authorities are incorporated within the framework of provincial fiscal needs, and all central government financial transfers are channelled through PCs.

Provincial finance consists of revenue transfers by the central government, own source revenues and grants from general treasury. PCs are entrusted to collect own sources revenue from defined sources through taxes, duties, fees and charges and rents. Shared tax revenue to PCs also counts as own source revenue, as stipulated under the Provincial Councils Act of 1987 although they are collected by central government agencies. Until 2011, about 90% of revenue of PC revenue were own revenue collected from the business turnover tax (BTT) on wholesale and retail sales, motor traffic fees and stamp duty and court fines. In 2011, the BTT, which was the main own source of revenue of provincial revenue collection, was abolished and began to be collected by central government agencies upon agreement of the president, in order to reduce transaction costs of businesses paying taxes to different levels of government. The loss of revenue for the PCs was compensated through a revenue sharing mechanism introduced by the central government in accordance with Fiscal Policy Circular 01/2010.

LAs are mandated to collect revenue from over 30 designated sources such as property tax, entertainment tax, tax on animals and vehicles, user charges for direct services, fines and rents from the properties owned by LAs. Stamp duty on land sales and transactions and court fines left aside, all own source revenue is directly collected by the LAs.

TAX REVENUE: Subnational governments do not have the power to set new direct or indirect taxes without the agreement of Parliament. They are in charge of tax collection and can influence and decide on tax rates but are limited when setting the tax base, which requires the establishment of statutes and by-laws and compliance with the hierarchy of regulatory acts.

As per the Fiscal Policy Circular No. 01/2010 issued by the secretary to the Treasury on 29 December 2010, PCs received one-third of the nation building tax (NBT), 100% of stamp duty and 70% of vehicle registration fees out of the total shared tax revenue collected by the central government. PCs generate little revenue through own source taxes but no specific data is available at present.

At municipal level, local authorities receive revenue from the property tax, which is imposed on the “rental value of all houses, buildings and lands within the designated developed areas in the local authority”. Property tax is levied by the LAs depending on the usage of the land parcel and the annual rental value of the property. The laws provide authority for LAs to impose differential rates for levying property tax on residential, commercial and industrial land uses. Only the properties in the MCs, UCs and formally declared built-up areas in the rural councils are subject to the property tax. Stamp duty and court fines are collected by PCs and transferred to the LAs according to the Constitution. Revenue from the stamp duty is the single largest source of municipal revenue and brings almost 30% of own revenue to the local authorities. It is followed by property tax, which accounts for 25% of local revenue according to the available data for 2019. Revenue from taxes account for 8.9% of total subnational revenues. Including shared tax revenue, PCs tax revenue accounts for 68% of the total subnational tax revenue.

GRANTS AND SUBSIDIES: Provincial and local governments receive transfers from the central government to cover the costs of permanent staff and to meet the “gap” between their expenditure and revenue. The actual disbursement of funds from the treasury to subnational governments are, however, usually lower than the recommendation made by the Finance Commission, due to central government decisions on budgetary policies. In 2019, only 34% of the recommended allocation by the Finance Commission for capital expenditure was released by the central government to PCs and LAs, while the funds transferred for recurrent expenditure were aligned with the recommendation made.

PCs receive 4 main categories of transfers: a) Block Grant for covering recurrent expenditure needs of the PCs, including salaries, overtime, pension, travelling and to sustain and improve public service delivery; b) Provincial Specific Development Grant (PSDG) to finance the needs of capital development programmes with special attention to infrastructure and community development; c) Criteria-Based Grant (CBG) for capital expenditure aimed at improving the socioeconomic conditions of the people, contributing towards reducing regional disparities; and d) Other grants which include any other specific grants assigned by the Finance Commission or other line-ministries on behalf of national government for achieving specific development objectives. In 2019, based on the annual report of the Finance Commission, of the total receipts by the PCs, block grants accounted for 95% of the transfers, 4% for the PSDG and 1% for the CBG, although these proportions vary from year to year.

LAs receive grants from the central government through PCs to cover the expenditure for permanent staff and capital expenditure. In addition, PCs receive grants to cover their own recurrent expenditure such as maintenance of office buildings and repairs of vehicles, while LAs use own-source revenue for these expenses. Almost 83% of the revenue of subnational governments takes the form of grants and subsidies in 2019. From this total amount of grants and subsidies received by the subnational governments, 88% accounts for PC revenue.

OTHER REVENUE: Other revenue generated take the form of tariffs and fees and income from assets, which together account for 0.2% of GDP in 2019. In general, tariffs and fees of PCs include fees charged under the Motor Traffic Act, fees imposed by courts, stamp duty on land transactions and license fee on toddy sales. Among LAs, tariffs and charges consist of tariffs from community water supply schemes, charges for hiring of city halls and charges for regulatory services including issuing building permits and changing the ownership of properties.

Subnational government fiscal rules and debt
2019	Dollars PPP / inh.	% GDP	% general government debt	% SNG debt	% SNG financial debt
Total outstanding debt (consolidated)	3.1	0.02%	0.03%	100.0%	-
Financial debt	3.1	0.02%	-	100.0%	-
Currency and deposits	-	-	-	-	-
Bonds / debt securities	-	-	-	-	-
Loans	3.1	0.02%	-	100.0%	100.0%
Insurance pensions	-	-	-	-	-
Other accounts payable	-	-	-	-	-

FISCAL RULES: In Sri Lanka, the Fiscal Management (Responsibility) Act (FMRA) of 2003, amended in 2013 and 2016, makes fiscal discipline mandatory. Though FMRA guides the fiscal management in the central government, no specific framework is available for the financial management of PCs and LAs, although both should comply with the legal provisions in Section 23 (1) of the Provincial Councils Act No. 42 of 1987 and the National Audit Act No. 19 of 2018 read in conjunction with Article 154 (3) of the Constitution. In addition, both PCs and LAs are expected to follow the financial management regulations and rules stipulated under the Provincial Councils Act of 1987, the Municipal Councils Ordinance No. 29 of 1947, the Urban Councils Ordinance No. 61 of 1939 and the Pradeshiya Sabha (Rural Councils) Act No. 15 of 1987.

The Provincial Councils Act No 42 of 1987 stipulates that PCs are expected to provide an annual financial statement, while municipal and urban councils must prepare budgets of accumulated reserves and income and expenditure statements that should be submitted to the general assembly of PCs and local council meetings. The same act provides for the establishment of a Provincial Fund for managing the revenues and meeting the expenditures of PCs, but no power is granted to have deficit in budgets.

DEBT: Although provinces are vested with the power to borrow under the 13^th Amendment to the Constitution in 1987, the required laws permitting the extent of borrowing have not been made by the Parliament. Therefore, no PCs have engaged in borrowing of funds from external sources.

According to the main laws, local authorities can access loans through the Local Loans and Development Fund (LLDF) which is a statutory body established through the Local Loans and Development Ordinance No. 22 of 1916. Its primary function is to provide funding and long-term loans at concessionary interest rates to any local government with a focus on infrastructure development and capital investment needs of local authorities. The fund functions under the authority of the Ministry of Finance with the guidance of the line ministry responsible for local governments. In 2018, the central government granted a total of USD 2.46 million (about USD PPP 50 000) to local governments through the LLDF, a 30% increase in loans processed compared to 2016. The LLDF is managed by a Board of Commissioners (BoC), comprising seven chief secretaries, two provincial commissioners, one member appointed by the Minister of Finance and three members nominated by the line ministry responsible for local governments.

In 2019, LAs account for the entirety of subnational government debt, which is at about 0.02% of GDP. The debt of all LAs account for USD PPP 3.1 per inhabitant.

TERRITORIAL MANAGEMENT OF THE CRISIS: After the detection of the first COVID-19 case in March 2020, the president of Sri Lanka established a high-level task force of 40 members (Gazette Extraordinary No. 2168/8), including ministries’ secretaries, the director general of health services, commanders of Tri-Forces, security chiefs, chairmen of several departments, corporations, central government and districts’ authorities and divisional secretaries as well as provincial governors at the subnational level. Under the executive order of the president, another specific task force was set up to look into the social impacts of the pandemic and address the needs of the poor and the vulnerable through effective coordination of governmental and development partners such as UN agencies, the WHO and local civil society organisations. Though provincial councils were represented as members in these high-level committees, deconcentrated government institutions at the local levels (district secretary and divisional secretary offices) and security forces played a larger role in the implementation of decisions made at these committees. Local authorities were only represented in local-level committees for the management of the pandemic. The coordination mechanism formalised through these two task forces helped to address the pandemic situation more effectively but the involvement of the military in civilian affairs was considered by some as an infringement of power over the legally mandated democratic institutions of subnational governments.

Health being a concurrent responsibility of provincial councils (PCs) under the 13^th amendment to the Constitution, PCs played crucial role in responding to the COVID-19 crisis at subnational level under the guidance of the line ministry responsible for health services. The management of COVID-19 patients in quarantine centres and monitoring of post-treatment patients were carried out by the provincial department of health services and related institutions because all the major hospitals and administrative authorities of the health sector employees are under the responsibility of PCs.

LAs mostly engaged in the prevention of the COVID-19 pandemic under the supervision of provincial health authorities. LAs engaged in waste removal and disinfection, and health awareness campaigns (under the guidance of the area medical health officer). Representatives of all local authorities attended the COVID-19 response meetings at the divisional secretary level. Most of the urban LAs, which have more financial and human resources and physical infrastructure than rural councils, actively supported the prevention and control of the COVID-19 pandemic in close coordination and with supervision of provincial health institutions.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: The government has worked in priority for the strengthening of its health sector preparedness and adopted measures to minimise the economic fallout. As short-term measures, the central government introduced immediate cash transfers to the vulnerable communities with distribution of essential food items. According to the Institute of Policy Studies of Sri Lanka, as of August 2020, the government is estimated to have allocated 0.1% of GDP for containment measures and announced an additional allocation of nearly 0.25% of GDP for cash transfers for vulnerable groups under its fiscal package. Many subnational governments engaged in distribution of dry rations and cooled meals to disadvantaged communities in their area.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: Research carried out by the Asia Foundation and Federation of Sri Lankan Local Government Authorities revealed that collection of expected own revenue for the years of 2020 and 2021 were reduced by about 20 to 40% in the LAs compared to the estimations. This was mainly due to the loss of expected revenue from the rental fee, property tax and trade licenses usually received from the businesses located in the local authority area, while the expenses for controlling the pandemic increased. Another common impact observed was the halt or postponement of expenditure for capital development works to accommodate funds for COVID-19 related expenditure in urban local authorities.

Subnational governments engaged to support their communities amid the pandemic, by ways of coordination with the divisional secretaries, using own funds, collecting funds from different local businesses and donors and partnering with local civil society organisations (CSOs).

ECONOMIC AND SOCIAL STIMULUS PLANS: Sri Lanka has taken a range of actions to contain the spread of the virus under its COVID-19 economic recovery plan. As long-term measures, in line with the recommendations of multilateral financial institutions, policy responses are directed to spending and revenue-side measures (health and non-heath spending, extending payment deadlines for income tax, and tax exemptions on health imports), government-supported liquidity measures (debt moratoriums and working capital loans) and supplementary economic revival measures (loans for investments at concessional rates to businesses in IT, apparel, plantation and tourism sectors). Subnational governments are expected to play a minimal role in the implementation of these stimulus packages because the central government acted primarily through its deconcentrated mechanisms.