Category: Daily Financial Times

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.

Sri Lanka has picked a 15-member squad of players with Chamari Athapaththu as captain for the upcoming three-match Women’s ODI series against Pakistan.

The series which forms part of the ICC Women’s Championship 2025-29 cycle which is the pathway to the ICC Women’s Cricket World Cup 2029 will take place at the Mahinda Rajapaksa International Cricket Stadium.

The three matches will be played on 23, 25 and 28 July.

Pakistan are currently placed second and Sri Lanka third in the current standings with eight points each.

Sri Lanka Women’s ODI Squad

Chamari Athapaththu (Captain), Vishmi Gunaratne, Hasini Perera, Harshitha Samarawickrama, Hansima Karunaratne, Kaveesha Dilhari, Nilakshika Silva, Anushka Sanjeewani, Chethana Vimukthi, Inoka Ranaweera, Nimasha Meepage, Imesha Dulani, Dewmi Vihanga, Rashmika Sewwandi, Kawya Kavindi

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.

CIPM Sri Lanka, the Nation’s Leader in Human Resource Management, has appointed veteran HR professional, corporate leader and academic Dr. Neil Bogahalande as its President for the new term. The appointment was confirmed at the Institute’s Annual General Meeting (AGM) held on 18 July 2026 at the Galadari Hotel, Colombo.

Dr. Bogahalande was invited by the outgoing Executive Council to assume the Presidency in recognition of his outstanding service to the Institute and significant contributions to the HR profession. Having served on the CIPM Executive Council in several leadership roles since 2006, he brings nearly two decades of institutional knowledge, strategic leadership and professional expertise.

A distinguished old boy of St. Anthony’s College Kandy, Dr. Bogahalande began his career in the plantation sector before transitioning to Human Resource Management in 2000. Dr. Bogahalande has led HR functions at Browns Group PLC, Sampath Bank PLC, and Royal Ceramics Lanka PLC. He has also served as a Main Board Director of listed and unlisted companies for over fifteen years and has chaired two State-Owned Enterprises after approval by the Parliamentary Committee on High Posts.

Dr. Bogahalande holds a PhD in Management, is a Certified Management Accountant (Australia), and has completed an advanced program in People Analytics and Data Science at the prestigious University of Cambridge, UK. An accomplished academic and researcher, he has published internationally, serves on the Expert Panel of the National Science Foundation of Sri Lanka, and has received several prestigious recognitions, including the World HRD Congress’ Pride of HR Profession Award and CIPM Sri Lanka’s Lifetime Gold Medal.

“I am honoured to assume the Presidency of CIPM Sri Lanka. As the nation’s leading professional body for Human Resource Management, we have a responsibility not only to develop world-class HR professionals but also to influence the future of work through thought leadership, innovation and ethical people practices. Together with our members, partners and stakeholders, I look forward to strengthening CIPM’s legacy while positioning Sri Lankan HR on the global stage,” said CIPM Sri Lanka President Dr. Neil Bogahalande.

Under Dr. Bogahalande’s leadership, CIPM Sri Lanka aims to strengthen professional excellence, foster innovation in people management, expand international collaborations, and develop future-ready HR professionals to meet the evolving needs of business and society.

Business autobiographies often follow a familiar pattern. They recount the milestones, the setbacks and inevitably, the success that followed. Made in Nepal certainly does all of these things. Yet what surprised this reader most was that it is not really a book about becoming Nepal’s first dollar billionaire. Instead, it is a reflection on what it means to build something enduring from a place the world has too often overlooked.

The book begins, as many family businesses do, with family itself. Chaudhary reflects on his family’s early years with a refreshing honesty, painting a picture of a Nepal that feels worlds away from today’s increasingly global economy. These opening chapters are among the book’s most engaging. They are personal, grounded, nostalgic and offer a glimpse into the values that would later shape one of South Asia’s most successful business groups.

From there, the story gathers momentum, demonstrating remarkable commercial foresight. Readers follow the evolution of a local enterprise into a global conglomerate, with Wai Wai noodles becoming the catalyst for a much larger journey across industries, borders and generations. Chaudhary refused to believe that geography should define ambition. The title Made in Nepal ultimately becomes more than a reference to place; it becomes a statement of confidence.

Gen Z’s have come of age in an era defined by rapid technological change, start-up culture and the pursuit of disruption. We are conditioned to measure success by speed and admire businesses that scale overnight and founders who redefine industries before the age of thirty. Made in Nepal presents a compelling alternative. It reminds us that some of the most meaningful businesses are built patiently, through decades of disciplined decision-making, calculated risk-taking and an unwavering commitment to the long term, irrelevant of political instability, economic uncertainty and changing markets. There is a quiet confidence throughout the book that success rarely follows a linear path. Instead, it is built incrementally, often through consistency rather than spectacle. For Gen Z readers accustomed to carefully curated stories of instant achievement, this perspective serves as both a refreshing reminder and an important reality check.

What stood out throughout the book was Chaudhary’s deep belief in family-not only as the foundation of his success, but also the future of the business itself. Chaudhary writes openly about the trust he places in each of his three sons, giving them the autonomy to lead their respective verticals while remaining their anchor. Chaudhry demonstrates succession planning that feels both timeless and progressive, reminding us that preserving a legacy is not about holding on too tightly, but about giving each generation the confidence, responsibility and space to leave its own mark.

The book focuses more on business philosophy rather than solely on the author’s personal life. Similarly, those expecting a step-by-step entrepreneurial guide may discover that the lessons are presented more through reflection than instruction. However, this is entirely consistent with the book’s purpose. It seeks less to provide formulas for success and more to encourage readers to think differently about building institutions that endure

Another theme that runs consistently throughout the book is identity. In an increasingly globalised world, businesses often feel pressure to distance themselves from their origins in pursuit of international relevance. Chaudhary takes the opposite approach. Rather than seeing Nepal as a limitation, he positions it as an integral part of the company’s identity. Through his own journey, Binod Chaudhary presents a narrative that extends beyond personal success, inviting readers to consider how resilience, ambition and identity can coexist in the making of a global enterprise. The message conveyed is that opportunity today is less about where one begins and more about the mindset with which one approaches the world.

Another noteworthy aspect of the memoir is its treatment of leadership. Rather than portraying leadership as authority or visibility, Chaudhary presents it as responsibility. Throughout the memoir there is a recurring emphasis on relationships, trust, adaptability and reliability-qualities that cannot be measured on a balance sheet and rarely dominate headlines but often determine whether businesses endure across generations. His reflections suggest that the true measure of leadership lies not simply in growing an organisation, but in creating one capable of outlasting its founder. To a generation that values authenticity, these lessons feel particularly relevant at a time when leadership is often measured by curated visibility rather than substance.

Cover of Nepalese billionaire and Chaudhary Group Chairman Binod Chaudhary’s latest book ‘Made in Nepal’

For Gen Z’s, many of whom increasingly aspire to lead organisations with both commercial and social impact, Chaudhry’s approach feels particularly relevant. The book subtly argues that profitability, sustainability and purpose can exist in unison. Long-term success emerges when businesses contribute meaningfully to the communities, employees and economies that support them.

If there is one observation to make, it is that the narrative occasionally moves too quickly through some of the Group’s defining milestones, leaving the reader wanting deeper insight into the strategic thinking behind its decision making. The book focuses more on business philosophy rather than solely on the author’s personal life. Similarly, those expecting a step-by-step entrepreneurial guide may discover that the lessons are presented more through reflection than instruction. However, this is entirely consistent with the book’s purpose. It seeks less to provide formulas for success and more to encourage readers to think differently about building institutions that endure.

Ultimately, Made in Nepal succeeds because it is not simply a memoir about one entrepreneur’s success. It is a thoughtful reflection on ambition, resilience and the quiet discipline required to build institutions that stand the test of time. Long after the financial milestones have faded from memory, what remains is a philosophy of building-one rooted in patience, integrity and an unwavering belief that world-class businesses can emerge from anywhere.

For a generation often encouraged to chase the next big thing, Made in Nepal is a timely reminder that there is equal value in building something that will still matter fifty years from now.

Binod Chaudhary will be a featured speaker and panellist at the Colombo Literary Festival 2026 on the 24 and 25 July 2026.

(The reviewer is a Director of the Galle Face Hotel and Galle Face Group Hospitality. She focuses on strategy, brand development and the long-term positioning of the Group’s hospitality portfolio. As part of a third-generation family business, she has a particular interest in leadership, legacy and institutional stewardship)

The Ceylon Chamber of Commerce recently convened “Energy Transition in Sri Lanka: Strategic Insights from Global Markets,” bringing together stakeholders from Government, industry, academia, and the energy sector to discuss the policies, investments, and reforms needed to accelerate Sri Lanka’s transition towards a more secure, affordable, and sustainable energy system.

The discussion focused on the growing role of renewable energy in meeting Sri Lanka’s rising electricity demand while reducing dependence on imported fossil fuels. Solar energy was identified as a priority area for expansion, with participants highlighting the importance of purchase tariffs, procurement mechanisms, and distributed renewable energy development to encourage private investment, strengthen grid stability, and reduce transmission losses.

Participants also examined the barriers that continue to slow renewable energy deployment, including policy inconsistency, lengthy approval processes, land acquisition challenges, grid constraints, and delays in project implementation. The need for a stable and predictable policy environment, streamlined regulatory processes, and stronger institutional coordination was identified as essential to improve investor confidence and accelerate project delivery.

The dialogue explored the role of procurement frameworks, financing mechanisms, and electricity sector reforms in supporting future investment. Net metering and feed-in arrangements were recognised as important tools to encourage commercial and industrial users to adopt solar power by enabling them to sell surplus electricity back to the grid. Participants also stressed the importance of improving access to financing, developing more bankable project structures, and addressing financial sustainability issues, including timely payments to renewable energy developers.

Energy storage systems emerged as a key area of discussion, with participants highlighting their importance in supporting greater renewable energy integration, improving grid stability, and enhancing system flexibility. Global experiences in deploying solar-plus-storage solutions were examined, alongside the need for clear technical standards, safety frameworks, financing mechanisms, and market structures to support the adoption of energy storage technologies in Sri Lanka.

The discussion also considered the wider economic implications of the energy transition. With electricity demand expected to increase alongside digitalisation, artificial intelligence, electric vehicles, and data centres, participants emphasised the need to modernise the country’s energy infrastructure through intelligent grids and emerging technologies to support long-term economic competitiveness.

Human capital development was another important theme, with participants calling for closer collaboration between industry and academia, expanded technical training opportunities, and stronger local expertise in renewable energy and energy storage technologies to support the sector’s continued growth.

The dialogue concluded by emphasising that achieving Sri Lanka’s renewable energy ambitions will require coordinated action across policy, regulation, financing, and infrastructure development.

The Central Bank of Sri Lanka (CBSL) yesterday said its Financial Intelligence Unit (FIU) imposed administrative penalties totalling Rs. 14.6 million on 12 reporting institutions between October 2025 and March 2026, with the enforcement action highlighting failures to report high-value transactions within stipulated timelines, weaknesses in customer screening against UN sanctions lists, and broader gaps in anti-money laundering and countering the financing of

terrorism (AML/CFT) controls.

The FIU, which functions as Sri Lanka’s regulator for AML/CFT, said the penalties were imposed under Section 19 (1) read together with Section 19 (2) of the Financial Transactions Reporting Act, No. 6 of 2006 (FTRA) after considering the nature and gravity of the relevant non-compliances. The funds collected as penalties were credited to the Consolidated Fund.

The penalties covered 12 institutions, comprising eight financial institutions and four designated non-financial businesses and professions, following risk-based on-site examinations, spot examinations, and offsite follow-up examinations.

The highest penalty of Rs. 3 million was imposed on Citizens Development Business Finance PLC after the FIU identified failures in customer screening and sanctions compliance.

The FIU said the company had failed to effectively verify whether prospective customers appeared on designated lists issued under UN Security Council resolutions before entering into new business relationships. It had also failed to effectively screen its existing customer database when sanctions lists were updated.

The examination found that, due to these gaps in systems and procedures, the company had established and maintained business relationships with three individuals designated under UN Regulation No. 1 of 2012, issued pursuant to UN Security Council Resolution (UNSCR) 1373.

The FIU said the company had also failed to freeze funds, other financial assets, and economic resources held by designated persons and failed to inform the FIU of such assets within the required 24-hour period.

Cargills Bank PLC and Sanasa Life Insurance Company PLC were each fined Rs. 2 million for separate AML/CFT compliance failures.

Cargills Bank was penalised after failing to report 18 electronic fund transfer transactions from an examination sample where the value exceeded Rs. 1 million or its equivalent in foreign currency within the prescribed period.

The bank was also found to have failed to maintain a complete list of designated persons, groups, and entities under UN Regulation No. 1 of 2012. The FIU said the lapse was due to delays in updating designated lists within the bank’s screening tool, but no business relationships with designated individuals or entities were identified during the examination.

Sanasa Life Insurance was fined after failing to report nine cash transactions exceeding Rs. 1 million within the required period and for shortcomings in maintaining updated sanctions lists, screening customers and beneficiaries, and obtaining senior management approval before establishing a business relationship with a politically exposed person. The FIU said the examination did not reveal any business relationships maintained with designated individuals or entities despite the identified system and procedural gaps.

Penalties of Rs. 1 million each were imposed on LB Finance PLC, LOLC Securities Ltd., Janashakthi Finance PLC, and Indian Overseas Bank.

LB Finance was fined after failing to report nine transactions exceeding Rs. 1 million or its equivalent in foreign currency within the specified period.

LOLC Securities was penalised for failing to report 12 electronic fund transfer transactions exceeding the reporting threshold, while Janashakthi Finance was cited for delays in verifying prospective customers against designated lists before establishing business relationships.

Indian Overseas Bank was penalised for several deficiencies, including failing to report 13 transactions exceeding the reporting threshold, inadequate sanctions screening during wire transfers, maintaining incomplete designated lists and delays in updating its screening system after receiving notifications from the FIU.

The FIU noted that no business relationships with designated persons or entities were identified in the cases involving LOLC Securities, Janashakthi Finance and Indian Overseas Bank.

Among designated non-financial businesses and professions, Swarnamahal Jewellers Ltd. received a penalty of Rs. 2 million for failures relating to customer due diligence, identification and verification of customers and beneficial owners, record retention, AML/CFT risk assessments and sanctions screening.

Harbour Village Ltd. was fined Rs. 1 million for failing to verify customers against designated lists and for not having mechanisms to screen existing customers when sanctions lists were updated.

Colombo Jewellery Stores Ltd. was fined Rs. 500,000 after failing to conduct a money laundering and terrorist financing risk assessment, while Zay’s Ltd. was fined Rs. 100,000 for failing to verify customers or beneficiaries against designated lists relating to targeted financial sanctions.

The FIU said the administrative penalties form part of measures to strengthen compliance with Sri Lanka’s AML/CFT framework by ensuring reporting institutions maintain effective transaction monitoring, customer due diligence and sanctions screening mechanisms.

LANKATILES PLC Managing Director Priyantha Talwatte (right) with The Geoffrey Bawa and Lunuganga Trusts Chairperson Channa Daswatte

Reinforcing its long-standing commitment to architecture, design excellence and the advancement of Sri Lankan living spaces, LANKATILES has announced a strategic partnership with the Geoffrey Bawa Trust.

The collaboration will support the Trust’s DesignTalk platform, the Annual Geoffrey Bawa Memorial Lecture and other knowledge-sharing initiatives that continue to inspire and cultivate Sri Lanka’s architectural community.

The partnership reflects a shared commitment to meaningful dialogue, creative exchange and the continued evolution of architecture in Sri Lanka. Aligning with Geoffrey Bawa’s enduring legacy, LANKATILES seeks to support platforms that nurture future talent and strengthen its engagement with the country’s architectural and design fraternity.

LANKATILES PLC Managing Director Priyantha Talwatte said: “Our association with the Geoffrey Bawa Trust reflects our shared belief that architecture shapes spaces, cultural identity and lasting legacies. LANKATILES is proud to support a community that inspires future generations of architects and contributes to an enduring culture of design.”

The Geoffrey Bawa and Lunuganga Trusts Chairperson Channa Daswatte said:

“The Trust supports a dynamic calendar of year-round public programmes, including exhibitions, lectures and tours that engage with the natural and built environment. In working with the Trust, LANKATILES is not only supporting this important work, but is also helping the Trust grow these programmes and supporting Sri Lanka’s architectural and design community.”

Over five decades, LANKATILES has combined world-class tile and surface solutions with a commitment to thoughtful design, craftsmanship, innovation, education and industry partnerships that have enhanced how Sri Lankans design, build and experience spaces. This collaboration reinforces the company’s belief that design extends beyond buildings to shape communities, culture and lasting legacies, while further strengthening its commitment to advancing Sri Lanka’s architectural and design landscape.

Established by the architect in 1982, the Geoffrey Bawa Trust works to promote architecture, the arts and environmental studies in Sri Lanka and abroad. Since Geoffrey Bawa’s passing in 2003, the Trust has maintained the architect’s archives and sustained year-round public programmes, that engage broad discourse on natural and built environments and the arts. These initiatives continue to inspire architects, designers, academics and students while creating meaningful opportunities for the exchange of ideas across generations.

The Colombo stock market continued its bearish-run, opening the week in the red with main index falling to a more than three-month low.

With 193 counters ending in red against just 32 that gained during the session, the ASPI was down a sharp 0.92% or 197.31 points at 21,208.10 and the active S and P SL20 was down 0.94% or 56.46 points at 5,943.22.

Market turnover was over Rs. 2.6 billion on nearly 66.5 million shares traded and foreign investors emerged as net buyers on a net inflow of Rs. 23.5 million.

DIAL, COMB, RICH, JKH and CARS were the major contributors to the ASPI decline.

First Capital Research said investor sentiment remained subdued amid ongoing geopolitical tensions in the Middle East, weighing on market confidence. HNW investor participation remained active, supported by several negotiated crossings, while retail participation was at average levels.

The food and staples retailing sector led the daily turnover with a share of 43%, followed by the food beverage and tobacco, and capital goods sectors collectively contributing 27%.

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)