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Front row from left: Vascular and Transplant Surgeon Dr. Gayan Bandara, Donor E. V. Asha Nilmini, Recipient P. Dilum Denendra Peiris, Lead Surgeon and General Surgeon Dr. Prabath Kumarasinghe, and Anesthetist Dr. Charaka Yapa Abeywardana

Back row from left: Medical Officer Dr. Anouchka Jayasinghe, Anesthetist Dr. Oliver Pathmaperuma, Medical Officer

Dr. Binoy Ranatunga, Anesthetist Dr. Danushka Wickramaratne, and General Surgeon Dr. Buddhika Dassanayake

Asiri Central Hospital has performed its first liver transplant successfully, marking a significant milestone in the advancement of specialised healthcare in Sri Lanka and bringing new hope to patients suffering from end-stage liver disease.

A highly experienced multidisciplinary transplant team, including transplant surgeons, hepatologists, anesthetists, intensivists, specialised nursing teams, and allied healthcare professionals, performed the complex procedure. The hospital’s continued investment in cutting-edge medical technology, specialised infrastructure, and clinical skills necessary to provide world-class transplant care locally is reflected in the successful outcome.

Commenting on the achievement, Asiri Central Chief Operating Officer Dr. Samanthi De Silva stated: “Our first liver transplant was completed successfully, marking a significant achievement for Asiri Central Hospital and demonstrating the commitment, skill, and collaboration of our interdisciplinary clinical teams. More significantly, it offers advanced liver disease patients and their families renewed hope. We remain committed to advancing Sri Lankan healthcare standards and increasing access to highly specialised treatments that enhance patient outcomes and quality of life.”

One of the most sophisticated procedures in modern medicine is liver transplantation, which requires seamless coordination across multiple specialties before, during, and after the surgery. This achievement lessens the need for patients in need of advanced liver transplant treatment to seek care overseas by providing them with complete, internationally benchmarked care closer to home.

For the patient and their family, the milestone also signifies a turning point in their lives, demonstrating the transformative power of advanced transplant services for individuals with severe liver disease and limited treatment options.

By demonstrating that highly specialised, world-class medical procedures can be provided locally through clinical excellence, innovation, and patient-centred care, Asiri Central Hospital continues to strengthen its position as one of Sri Lanka’s leading providers of advanced healthcare services.

The Corporate Governance Institute recently posed a question that cuts to the heart of modern directorship: What is the single greatest governance risk facing Boards today? My answer, after over 25 years of serving on Boards across banking, listed companies, public institutions, and multinational organisations, aligns with Guy Mallabone’s perspective: strategic irrelevance and also know-it-all attitude. Not fraud, not regulatory penalties, not even a cyber attack-though all can be devastating. The most serious governance failure occurs when a Board becomes so focused on managing yesterday’s risks that it fails to recognise tomorrow’s realities, often because it has stopped learning. A Board can be fully compliant, receive clean audit reports, and conduct regular reviews, yet still fail if it loses the ability to anticipate change. The greatest danger is a Board that performs its duties diligently while becoming intellectually disconnected from the world around it, harbouring the quiet, corrosive belief that it already knows everything. Recent research by The Corporate Governance Institute highlights this very challenge, revealing a widening gap between Boardroom confidence and Board readiness. While many directors express confidence in their overall effectiveness, significant gaps remain in their preparedness to navigate emerging risks such as artificial intelligence, cyber security, ESG expectations, and regulatory complexity.

Governance has moved beyond compliance

When many of us first entered Boardrooms, governance was largely viewed through a compliance lens: approving budgets, reviewing financial statements, monitoring controls, and ensuring regulatory obligations were met. Those responsibilities remain essential, but they are no longer enough. Today’s directors operate under unprecedented scrutiny from shareholders, regulators, employees, customers, the media, Gen Z and society at large. Boards are expected not only to provide oversight but also to demonstrate foresight and leadership.

The modern Board agenda

The modern Board agenda must address cyber security threats and the disruptive impact of artificial intelligence; geopolitical uncertainty and shifting economic realities; climate risks and sustainability expectations; talent shortages and workforce transformation; and the challenge of balancing stakeholder expectations with long-term value creation-all in an environment where information is often incomplete and decisions must be made at speed.

The Social Media accelerant

One of the biggest changes in governance has been the rise of social media. Previous generations of directors never faced an environment where a single incident-whether accurate, exaggerated, misunderstood, or entirely false-could spread globally within minutes. A reputation built over decades can be damaged in hours. The challenge is not simply responding quickly; it is responding responsibly. Boards must separate facts from speculation, communicate with clarity, and protect stakeholder confidence while ensuring every word is legally sound. Misinformation often travels faster than the truth, and directors are expected to act immediately, even as every response must withstand intense scrutiny. Traditional governance frameworks were not designed for this speed and complexity. The defining capability of future Boards will therefore be not just knowledge, but judgement under uncertainty.

What future-ready Boards do differently

Future-ready Boards do not merely review history. Research shows that they interrogate the future. This means rethinking priorities. Financial performance and compliance remain critical, but they should not dominate the agenda. More time must be devoted to deeper questions: What assumptions are we making today that may no longer hold true tomorrow? Are we creating tomorrow’s businesses or simply protecting yesterday’s? Do we have the Talent capable of navigating an uncertain future? What risks are we prepared to take, and are they aligned with our strategy and stakeholder expectations ?Most importantly, strong Boards normally encourage constructive challenge and create an environment where directors can ask difficult questions without fear. The first sign of an irrelevant Board is often not disagreement, but silence-and the moment it stops learning.

The most serious governance failure occurs when a Board becomes so focused on managing yesterday’s risks that it fails to recognise tomorrow’s realities, often because it has stopped learning

Stewardship in a changing world

The greatest evolution I have witnessed in governance is the shift from narrow shareholder oversight to broader stewardship. Boards are no longer judged only by the decisions they make, but by how quickly they identify emerging threats, how transparently they respond during crises, and how effectively they protect the organisation’s most valuable intangible asset: trust. Financial losses can be recovered, strategies can be changed, and brands can be rebuilt. But trust, once damaged, is exceptionally difficult to restore.

Keep learning

The Boards that succeed in the next decade will not be those with the longest governance manuals or the most detailed compliance checklists. They will be the Boards that remain curious, humble, and strategically and intellectually restless. Perhaps the greatest governance risk of all is not the failure to anticipate change, but the dangerous belief among directors that they already know everything. The moment a Board stops learning, questioning, and challenging its own assumptions is the moment it begins to lose relevance. In an era of relentless disruption, the greatest governance risk is not making the wrong decision. It is realising, too late, that the Board stopped asking the right questions while the answers still mattered for the future.

The powerful testimony of retired Major Ajith Prasanna on WANESA TV has laid bare the scandalous state of Sri Lanka’s prisons. A war hero, lawyer, and former parliamentarian who endured nearly four years of rigorous imprisonment, Prasanna described abysmal food rations, chronic shortages of basic hygiene items, degrading body searches, woefully inadequate medical care, and, most damningly, systemic corruption in which some prison officers allegedly profit from smuggling drugs, mobile phones, and other contraband (YouTube).

These revelations landed with explosive force in the aftermath of the deadly July 2026 violence at Negombo Prison, where clashes left dozens dead and injured, followed by credible reports of reprisals against transferred inmates. Yet this is no isolated scandal. It is the predictable outcome of decades of neglect, myopic policy, and a political culture addicted to blame games that shield the powerful while ordinary citizens, especially the poor, pay the ultimate price in broken families, wasted lives, and eroded national security.

Prisons in Sri Lanka have degenerated from institutions of correction into overcrowded warehouses of human misery. With over 44,000 inmates, many held on minor drug-related charges or in prolonged pre-trial detention, facilities like Welikada have become pressure cookers where minor offenders mix with hardened criminals, rehabilitation is virtually non-existent, and basic human dignity is routinely violated. Prasanna’s account of forced nudity during searches, beatings despite his status, and denial of essential medical checks is not mere anecdote, it is evidence of a system that has abandoned its rehabilitative mandate.

This image of overcrowded prison conditions captures the reality too many endure: mass confinement without hope, hygiene, or humanity. When the state locks people away in such environments and then releases them without skills, support, or a pathway out of stigma, it manufactures recidivism rather than redemption. Labelling former inmates as RC or IRC and placing them under nominal police supervision without genuine reintegration programs is not justice, it is a recipe for repeated failure.

The vicious cycle: Poverty, drugs, and systemic neglect

The rot does not begin at the prison gate. It festers in the socio-economic conditions that propel people into crime in the first place. Through direct work with the Save the Pearls organisation in vulnerable communities north of Colombo, our teams documented the grim mechanics of this cycle. Families crammed into single-room dwellings without proper sanitation, encircled by drug dealers and addicts. Fathers repeatedly imprisoned on drug offences, leaving mothers and children economically destitute. Children recruited, knowingly or not, as couriers. In one devastating case, a girl of 13 or 14 stood guard while her mother engaged in survival sex work inside the home, already being groomed into the same destructive pattern.

Housing schemes meant to uplift the poor have sometimes concentrated vulnerability, creating dense networks that provide early warnings to criminal elements ahead of law enforcement raids. Poverty, absent positive role models, exposure to “villainy,” and a complete lack of viable alternatives push individuals into offending, some willingly, many through circumstance or coercion. Once inside the system, the lack of meaningful rehabilitation ensures they emerge worse off, labelled and marginalised, only to be sucked back into the vortex.

This infographic on breaking the cycle of poverty illustrates exactly what is missing: sustained investment in education, early childhood development, skills training, and social mobility. Instead of such upstream interventions, successive governments have relied on downstream enforcement that treats symptoms while the disease spreads. The result is a self-perpetuating machine that consumes human potential and public resources alike.

Anti-drug operations: A double-edged sword wielded without strategy

Sri Lanka’s intensified anti-drug campaigns have been necessary and, in many respects, overdue. The narcotics trade undermines communities, fuels violence, and threatens national security. However, when success is measured primarily by arrest numbers and headline-grabbing seizures, enforcement becomes blunt and counterproductive.

Pressure to meet targets leads to the sweeping up of users, addicts, and low-level couriers alongside major dealers and traffickers. The prisons swell with individuals who require treatment and support far more than incarceration. Minor offenders are hardened by exposure to serious criminals. Families are shattered. And the underlying drivers, poverty, unemployment, family breakdown, and easy availability of drugs, remain largely unaddressed.

This is the double-edged sword in action.

Short-term optics satisfy political narratives and social media outrage cycles, but they create long-term congestion, human suffering, and diminished public trust. Law enforcement officers, forced to deliver visible results, become part of a system that prioritises quantity over quality of outcomes. The judiciary, meanwhile, hands down punishments intended to promote future well-being, yet without parallel rehabilitation and prevention architecture, those sentences often become revolving doors.

Ending the blame game: From political theatre to national responsibility

The endless cycle of blame, governments accusing predecessors, opposition parties scoring political points, institutions pointing fingers at each other, serves only one constituency: those who benefit from inertia. Ordinary Sri Lankans, particularly the most vulnerable, become the victims twice over, first through the failures that lead to crime and incarceration, and again through the absence of meaningful reform. This political theatre distracts from accountability and delays the hard work of systemic change.

It is time to declare an end to blame-game politics on issues of national security and public safety. Whether the domain is prisons, drugs, radicalisation, maritime threats, or social cohesion, reactive posturing must give way to proactive intelligence. My decades of experience in counter-terrorism and intelligence operations taught a fundamental lesson: prevention through timely, accurate intelligence is far more effective, and far less costly in human and financial terms, than managing the consequences of failure after the fact.

Proactive intelligence as the foundation of prevention

Intelligence-led approaches transformed our fight against terrorism by enabling foresight, targeted disruption, inter-agency coordination, and operations that respected both effectiveness and human rights. The same methodology must now be applied rigorously to the drugs-prisons nexus and broader

We can continue managing symptoms with ever-more-crowded prisons and reactive crackdowns, or we can invest in the upstream interventions and systemic reforms that turn potential offenders into productive citizens and patriots. The latter path honours the sacrifices of those who defended this nation and serves the well-being of all its people

domestic security challenges. This means:

Robust intelligence gathering on prison corruption networks and drug supply chains inside and outside facilities.

Early identification of at-risk individuals and families through community intelligence and social data.

Diversion programs that route users and minor offenders toward treatment and support rather than automatic incarceration.

Sustained investment in rehabilitation inside prisons, education, vocational training, counselling, and mental health services, paired with credible post-release reintegration that removes barriers to employment and social acceptance.

n Whole-of-society prevention: economic opportunities in high-risk areas, family strengthening programs, youth mentorship, and community policing that builds trust rather than fear.

Intelligence-led policing, as depicted in this framework, integrates data from multiple sources to drive proactive prevention rather than perpetual reaction. Applying this discipline across national security domains, not just prisons and drugs, offers the only credible path out of recurring crises.

A roadmap for genuine reform

Immediate measures must include independent oversight access to all detention facilities, urgent improvements to basic conditions (food, sanitation, healthcare), and decisive action against corrupt elements within the prison system. Medium-term priorities should encompass treatment-oriented diversion for substance users, separation of vulnerable inmates from predatory networks, and structured rehabilitation programs with measurable outcomes. Long-term transformation requires embedding proactive intelligence into policy design, addressing root socio-economic drivers through targeted development, and building political consensus that survives electoral cycles.

These are not soft options. They demand resources, political will, and a willingness to measure success by reduced recidivism, healthier communities, and enhanced national resilience, not merely arrest statistics or prison populations. The cost of continued inaction is measured in lost lives, fractured families, and a society that increasingly normalises human warehousing over human development.

Creating patriots, not predators nor prisoners

Sri Lanka’s prisons should once again become places where human beings are given a genuine chance at resurrection and contribution. By rejecting blame-game politics and embracing proactive, intelligence-driven prevention across all national security challenges, we can interrupt destructive cycles at their source.

The choice is stark but clear. We can continue managing symptoms with ever-more-crowded prisons and reactive crackdowns, or we can invest in the upstream interventions and systemic reforms that turn potential offenders into productive citizens and patriots. The latter path honours the sacrifices of those who defended this nation and serves the well-being of all its people.

It is time to begin, decisively, intelligently, and without further delay, the work of creating patriots, not prisoners nor predators.

(The author is a retired Senior Superintendent of Police, former Deputy Director (Counter Terrorism), State Intelligence Service and former Director, Police Special Branch. This analysis is offered in the interest of national security, institutional reform, and public safety)

Globally recognised Sri Lankan luxury wellness brand Spa Ceylon has taken the healing power of its island home to Dubai through its annual Spa Ceylon Global Wellness Tour.

Across three exclusive wellness experiences, the brand transformed some of Dubai’s most iconic venues into immersive sanctuaries inspired by Sri Lanka’s forests, wellness traditions and the timeless wisdom of Ayurveda.

Held under the theme “Return to Yourself,” the three experiences were designed to remind guests that wellbeing begins with taking a conscious pause to reconnect with themselves. Over 100 VIP guests, wellness leaders, influencers and content creators gathered to experience Spa Ceylon’s distinctive approach to holistic wellbeing.

The Dubai tour featured Immersive Forest Yoga at Immersee, where projection technology transformed the venue into a living rainforest inspired by the landscapes of the island. Guests also experienced ForestVeda: Breathe and Balance at Raffles the Palm and De-Stress Sculpt Pilates overlooking the Burj Khalifa at The Lana.

Each experience was personally led by Spa Ceylon Co-Founder Shalin Balasuriya, who guided guests through mindfulness, breathwork, meditation and sound healing, sharing the philosophy behind Spa Ceylon and creating meaningful moments of pause, connection and balance.

Speaking about the initiative, Spa Ceylon Co-Founder Shalin Balasuriya said:

“As wellness becomes increasingly important around the world, our island home has so much to offer through its rich traditions, nature and centuries of wellness wisdom. At Spa Ceylon, we create experiences that allow people to pause, reconnect and experience that healing energy for themselves. The Global Wellness Tour brings that experience to life in an authentic and immersive way.”

Shiwantha Dias, Co-Founder of Spa Ceylon, added:

“Our goal has always been to make the benefits of Ayurveda accessible through products people can use every day. By combining traditional knowledge with modern science, we create formulations that fit effortlessly into contemporary lifestyles while encouraging simple moments to pause, reconnect and restore balance. That’s how we believe wellbeing should be experienced – not as an occasional indulgence, but as part of everyday life.”

The Spa Ceylon Global Wellness Tour will continue across Asia, Europe and the Americas, bringing immersive wellness experiences inspired by Sri Lanka’s rich wellness heritage to audiences around the world.

The Ceylon Chamber of Commerce has called for policy consistency, streamlined approvals, and stronger investment frameworks to accelerate Sri Lanka’s transition towards renewable energy, as rising electricity demand increases the need for a more secure and sustainable power system.

In a statement yesterday following a forum titled ‘Energy Transition in Sri Lanka: Strategic Insights from Global Markets,’ The Ceylon Chamber said stakeholders from the Government, industry, academia, and the energy sector had identified renewable energy expansion, particularly solar power, as a priority area requiring coordinated reforms.

The discussion highlighted the need to strengthen purchase tariffs, procurement mechanisms, and distributed renewable energy development to encourage private investment, improve grid stability, and reduce transmission losses, according to The Chamber.

Participants identified policy uncertainty, lengthy approval processes, land acquisition difficulties, grid constraints, and project implementation delays as key barriers slowing renewable energy deployment.

The Chamber said stakeholders emphasised the importance of a stable and predictable policy environment, efficient regulatory processes, and improved institutional coordination to enhance investor confidence and accelerate project delivery.

The forum also examined financing mechanisms and electricity sector reforms required to support future investment, with net metering and feed-in arrangements recognised as important tools to encourage commercial and industrial users to adopt solar power by allowing surplus electricity to be supplied back to the grid.

Participants also highlighted the need to improve access to financing, develop bankable project structures, and address financial sustainability concerns, including timely payments to renewable energy developers.

Energy storage systems were identified as a critical component in integrating higher levels of renewable energy into the national grid, with stakeholders pointing to the need for technical standards, safety frameworks, financing mechanisms, and market structures to support adoption.

The Chamber said the discussion also focused on the broader economic implications of the energy transition, noting that electricity demand is expected to increase with the expansion of digitalisation, artificial intelligence (AI), electric vehicles (EVs), and data centres.

Stakeholders stressed the need to modernise energy infrastructure through intelligent grids and emerging technologies to support long-term economic competitiveness.

The forum also highlighted the importance of developing human capital through stronger collaboration between industry and academia, expanded technical training, and greater local expertise in renewable energy and storage technologies.

The Ceylon Chamber said achieving Sri Lanka’s renewable energy ambitions would require coordinated action across policy, regulation, financing, and infrastructure development.

World Bank Group’s International Finance Corporation (IFC) and The Hongkong and Shanghai Banking Corporation (HSBC) are investing up to $ 40 million through financing in South Asia Gateway Terminals Ltd., (SAGT) to modernise and decarbonise operations at Port of Colombo, the cornerstone of Sri Lanka’s maritime trade.

The investment will advance the Port’s competitiveness, resilience, and sustainability, reinforcing its position as South Asia’s leading transshipment hub and deepening Sri Lanka’s connectivity to global markets. A joint statement said the financing package – a sustainability-linked loan of up to $ 20 million from the IFC, including up to $ 8.57 million mobilised through the IFC’s Managed Co-Lending Portfolio Program (MCPP), and a parallel green loan of up to $ 20 million from HSBC – demonstrates how blended private capital can finance critical infrastructure at scale.

The proceeds will fund advanced twin-lift ship-to-shore cranes that will increase productivity, improve operational reliability, and reduce energy use, enabling SAGT to meet growing trade demands with faster, more efficient services to global shipping lines.

The transaction marks the IFC’s first sustainability-linked financing for an infrastructure company in Sri Lanka and a return to the country’s ports sector after two decades.

It builds on a longstanding partnership with SAGT that began in 1999, when the IFC financed Sri Lanka’s first public-private partnership (PPP) container terminal. Since then, SAGT has helped establish Port of Colombo as one of the region’s leading transshipment hubs, setting benchmarks for operational excellence, innovation, and private sector participation in Sri Lanka’s maritime sector.

The investment is expected to raise quay-side productivity by at least 11%, expanding the Port’s capacity to handle both transshipment and domestic container traffic. It will also help lower SAGT’s carbon footprint, create jobs, and open more opportunities for women in a sector where they remain significantly underrepresented.

Sri Lanka sits at the crossroads of some of the world’s busiest shipping routes, with nearly half of global container traffic passing nearby. Port of Colombo is central to this strategic advantage, anchoring the country’s role as a regional logistics hub and underpinning an industry that contributes around 2.5% of GDP.

SAGT CEO Steen Knudsen said: “At SAGT, we are committed to shaping the future of Sri Lanka’s maritime industry through continuous investment in world-class infrastructure that drives productivity, enhances operational excellence, and reinforces Port of Colombo’s position as a leading regional transshipment hub. As the IFC’s first sustainability-linked financing for an infrastructure project in Sri Lanka, this milestone underscores our commitment to pioneering sustainable growth and setting a new benchmark for the industry.”

World Bank Group Country Manager for Sri Lanka and Maldives Gevorg Sargsyan said: “When trade moves, economies follow. As the IFC’s first sustainability-linked financing for infrastructure in the country, this investment demonstrates how innovative financing can modernise essential economic assets, accelerate decarbonisation, and drive long-term, sustainable growth.”

HSBC Sri Lanka Director Banking – Corporate and Institutional Banking Amesh Dissanayake added: “Our international reach and global expertise support us to play a prominent role in financing the transition in the sectors where it matters most. Given its strategic importance to Sri Lanka, HSBC is committed to supporting the maritime and logistics sector as it modernises and transitions to a lower-carbon future. Our parallel green loan of up to $ 20 million will enable SAGT to upgrade critical port equipment, improving productivity and reliability while reducing energy consumption and CO2 emissions. This is an example of how sustainable finance can deliver practical, measurable outcomes.”

The investment aligns with the World Bank Group’s Country Partnership Framework for Sri Lanka and its programatic approach to ports and logistics, supporting the Government’s ambition to strengthen the country’s position as a regional logistics and transshipment hub and deepen the country’s integration into global trade networks.

Following its sovereign default, Sri Lanka has taken a significant step towards restoring macroeconomic stability through the achievement of a primary budget surplus. Fiscal consolidation should be viewed not as an end in itself but as a means of strengthening the economy’s long-term capacity to generate investment, productivity, and growth. The next phase of Sri Lanka’s recovery will depend not on fiscal arithmetic alone but on rebuilding domestic savings, strengthening capital formation, improving competitiveness, and enhancing institutional capability.

Sri Lanka’s achievement of a positive primary budget surplus marks a significant milestone in its recovery from the unprecedented 2022 economic crisis. For the first time in many years, Government revenue has exceeded non-interest expenditure, signaling that the state can finance day-to-day operations without additional borrowing. Together with declining inflation and progress in debt restructuring, these developments have restored macroeconomic credibility.

In the aftermath of the economic collapse, fiscal consolidation became an economic necessity to restore confidence among creditors and international financial institutions. Yet every major economic achievement involves trade-offs. The more important question is whether the policies that restored fiscal stability have also weakened some of the foundations of long-term economic growth.”

This distinction is fundamental: a primary surplus measures the Government’s fiscal position, not the nation’s capacity to generate future wealth. Macroeconomic stability is a prerequisite; however, it cannot independently yield enduring enhancements in productivity, investment, or living standards. Restoring fiscal discipline was merely the first stage; converting that stability into sustainable growth requires rebuilding the productive foundations of the economy.

Looking beyond fiscal arithmetic

Public discussion has understandably focused on improving fiscal indicators. However, successful development requires looking beyond the Government’s balance sheet.

Sri Lanka’s recovery should be viewed through two complementary balance sheets. The first is the Government’s, reflected in revenue, expenditure, deficits, and public debt. The second is the nation’s, comprising its financial, physical, human, technological, and institutional capital. While the first measures fiscal health, the second ultimately determines long-term prosperity.

Lasting prosperity will depend on rebuilding the nation’s productive capacity through higher domestic savings, stronger capital formation, enhanced competitiveness and more capable institutions

A Government may improve its fiscal position while the country’s productive capacity remains weak. If domestic savings decline, productive investment stagnates, and skilled people leave, fiscal improvement alone cannot sustain growth. The national conversation must move toward rebuilding the productive economy.

The flip side of fiscal consolidation

Sri Lanka’s fiscal adjustment program has concentrated on revenue mobilisation and expenditure restraint. At the same time, the process has coincided with a significant increase in the cost of living, higher utility tariffs, and reduced disposable incomes. While stronger revenue mobilisation has driven the primary surplus, a substantial proportion has come from indirect taxation, placing a heavy burden on consumption.

Fiscal policy should not merely restore budgetary balance. Its broader purpose should be to strengthen the economy’s capacity to generate future growth. Compared with successful Asian economies, Sri Lanka continues to depend heavily on indirect taxation while facing challenges in attracting investment and expanding exports. Revenue adequacy is essential, but the structure of revenue mobilisation must support entrepreneurship and the future expansion of the tax base itself.

The question, therefore, becomes:” Where will the capital required for Sri Lanka’s next phase of development come from?”

Domestic savings: The missing strategic variable

One consequence of fiscal adjustment has received remarkably little attention: the condition of domestic savings. For years, Sri Lanka relied on a combination of Government investment, domestic savings, and foreign capital. Today, each faces constraints: fiscal consolidation limits public capital expenditure, access to international capital markets remains constrained, and foreign direct investment falls short of regional peers. Savings finance investment; investment raises productivity; productivity strengthens competitiveness.

When external capital is limited and public investment is constrained, domestic savings assume strategic importance. They become the principal source for financing future investment and capital formation. As nations like Singapore, South Korea, and Vietnam have demonstrated, sustained transformation depends upon high levels of investment driven by a country’s capacity to generate its savings.

The broken savings-investment cycle

The relationship between household savings and national development is profound. Higher household savings strengthen the financial system, expanding long-term investment finance for businesses to upgrade technology and skills. This improves productivity, expands exports, and raises incomes, creating a virtuous cycle.

Conversely, when real disposable incomes decline over an extended period, households reduce savings. Lower savings weaken the domestic pool of investment capital, slowing capital formation and productivity growth.

This is the flip side of fiscal stabilisation. In Sri Lanka, the middle class has historically been a principal source of savings and entrepreneurship. Prolonged financial pressure on this segment impacts future innovation and labour productivity. For vulnerable households, persistent reductions in income affect nutrition, education, and healthcare, with long-term implications for human capital.

Capital formation and competitiveness

Capital formation is the bridge between stability and prosperity. Fiscal stability creates confidence; capital formation creates growth. Without adequate investment, productivity cannot rise, leaving enterprises struggling to compete internationally.

Sri Lanka’s structural challenges-insufficient domestic savings, modest foreign direct investment, and slow export diversification-long predate the 2022 crisis. Because fiscal space remains limited, the Government cannot finance the scale of investment required alone. The private sector must assume a larger role, supported by policies that encourage long-term productive investment over short-term commercial activity.

Human capital and stronger institutions

Physical capital alone cannot transform an economy; investment in people is equally vital. Sri Lanka, known for its strong human development indicators, faces challenges due to skilled professionals migrating abroad and ongoing skills mismatches. These issues jeopardise the country’s historical advantages in human development. To bolster future competitiveness, it is essential to treat expenditures on education, research, and digital capabilities as strategic investments.

Ultimately, sustainable development depends upon institutions capable of converting sound policies into measurable outcomes. Sri Lanka has rarely suffered from a shortage of policy ideas but rather a gap between formulation and implementation. Institutional capability-the practical ability of the state to design sound policies and maintain continuity across political cycles-is a critical competitive advantage that remains to be fully developed.

The Government should aim to transition towards growth by reducing tax reliance and fostering investment through structural reforms. Thus, the country’s Primary Budget Surplus should be viewed not as the culmination of economic recovery but as the starting point of a more demanding journey towards sustainable, inclusive and investment-led growth

The Budget as a strategic instrument

Forthcoming national budgets assume significance extending well beyond annual fiscal arithmetic. Their success should be judged by whether they begin to strengthen the productive foundations of the economy. Their success should be judged by whether they strengthen the productive foundations of the economy through protecting productive public investment, encouraging domestic savings, stimulating private investment through policy certainty, and investing in education, technology, and human capital.

Fiscal discipline and economic development are complementary. Fiscal credibility creates confidence, which encourages investment, raises productivity, expands exports, and generates rising incomes-thereby reinforcing the fiscal position itself.

Conclusion

Sri Lanka has made significant progress since the 2022 crisis, with fiscal stabilisation laying an essential foundation for future growth. However, Sri Lanka’s goal for a primary surplus-mandated by the IMF Extended Fund Facility-largely relies on arduous indirect taxation, which stabilises debt but negatively impacts domestic consumption and savings, thereby jeopardising economic growth. The article highlights the limitations of financial engineering, the need for long-term fiscal policies, and the dangers of complacency within fragile economies. Concerns arise regarding the sustainability of tax-based revenue, with calls for reforms to modernise tax administration and enhance compliance without hindering growth. Lasting prosperity will depend on rebuilding the nation’s productive capacity through higher domestic savings, stronger capital formation, enhanced competitiveness and more capable institutions.

The Government should aim to transition towards growth by reducing tax reliance and fostering investment through structural reforms. Thus, the country’s primary budget surplus should be viewed not as the culmination of economic recovery but as the starting point of a more demanding journey towards sustainable, inclusive and investment-led growth.

(The author is the former Chairman of the Finance Commission of Sri Lanka with expertise in financial management across various sectors. Having served as an investment banker and a Financial Management Specialist at the Commonwealth Secretariat, his career spans over five decades of dual-sector experience, focusing on institutional governance, fiscal policy, and structural reform in a comparative context)