The Shane Warne Foundation (SWF) told the Galle International Cricket Club in June that a fund-raising event had been a flop and thus the promised 50,000 dollars were not forthcoming.
Despite the letdown, officials in this southern Sri Lankan town, 72 miles (110 kilometres) south of Colombo, said they were hopeful of restoring the venue where Warne bagged his 500th Test scalp.
K. Mathivanan, the Secretary to the Sri Lanka Cricket (SLC) interim committee told AFP that work had got underway and there were plans to hold a Test match during the England tour planned for late October-November 2007.
"We have been speaking to the Urban Development Authority and the Archaeological authorities on rebuilding the stadium," he said on Tuesday.
He added that some of the reconstruction work in the indoor stadium badly damaged by the tsunamis had already commenced.
"The whole project is to cost 80 million Rupees ($750,000) and Sri Lanka Cricket will fund it", Mathivanan said, adding that President Mahinda Rajapakse had given the go ahead.
Warne, who became the first player to take 700 Test wickets on Tuesday, had visited the stadium soon after the devastating tsunami two years ago and promised money through his foundation to meet some of the rebuilding costs.
The stadium has a Portuguese-built fort and the Indian Ocean as a breathtaking backdrop. The Dutch and British colonial rulers later added to the fort which is now a UNESCO world heritage site.
The stadium, acclaimed as one of the loveliest cricket venues, was destroyed by the December 2004 tsunami which killed an estimated 31,000 people in Sri Lanka.
The pitch still carries marks of the giant waves which hit the island's southern main town - bare turf, piles of debris and rundown buildings cut a sorry picture of the once beautiful stadium.
In the immediate aftermath of the tragedy, the rebuilding was hit by a government zoning law that prevents reconstruction within 100 meters from the coastline.
The authorities at the time had even planned to shift the Galle stadium further inland to Habaraduwa. Mathivanan said all doubts had now been cleared.
Sri Lanka have won six out of the 11 Tests played at the venue.