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Budget 2026: Bankers present proposals to drive recovery
Sri Lanka’s banking sector has presented a set of far-reaching proposals for inclusion in the government’s Budget 2026.
The proposals, developed and submitted by the Sri Lanka Banks’ Association (SLBA), on behalf of all licensed commercial banks, were handed over to Deputy Minister of Finance, Planning and Economic Development Dr. Anil Jayantha Fernando at the Presidential Secretariat recently.
The submission underscores the critical role of banks in rebuilding economic resilience, restoring investor confidence and accelerating growth. The recommendations are designed not only to stabilise the financial system but also to expand opportunity for businesses, entrepreneurs and households nationwide.
The SLBA has called for urgent reforms to strengthen the financial sector’s capacity to support recovery. Proposals include targeted credit guarantee schemes to help revive distressed enterprises, accelerated tax deductibility for impairment provisions to encourage restructuring, and alignment of banking sector taxation with regional benchmarks. Excessive taxation, currently at 53% for domestic banks and 65% for foreign banks, is described as a barrier to competitiveness and capital formation. A fairer regime, the Association argued, would allow banks to direct resources towards lending for critical infrastructure and priority sectors.
Recognising the backbone role of SMEs in the economy, banks have urged the government to accelerate SME formalisation through mandatory VAT registration at concessional rates, the adoption of subsidised accounting software, SME-specific business bank accounts, and national-level financial literacy programmes. The SLBA also proposed mandatory Taxpayer Identification Numbers for all new accounts, and incentives for SMEs to digitise transactions, which would expand the tax base and improve credit access.
To drive growth and consumption, banks recommend rationalising indirect taxes to improve household disposable income and investor appetite, while broadening the tax net through digitisation and the use of proxy data such as utility and vehicle records. Simplifying compliance by treating withholding tax as a final tax, even at higher rates, was also suggested as a way to improve liquidity and overall revenue collection.
Calling for decisive investment in the country’s digital infrastructure, the SLBA proposed the creation of a national cloud framework to serve both public and private stakeholders, alongside tax incentives for fintech startups and local payment gateways. The Association also stressed the importance of levelling the playing field by applying VAT on global digital services, such as Google, Meta, PayPal, while advancing digital transactions by capping large cash payments and mandating electronic settlement of supplier, tax and utility bills. A public–private initiative on cybersecurity was also recommended to lower compliance costs and safeguard systemic resilience.
In proposals aimed at catalysing investment, the SLBA urged expedited restructuring of SriLankan Airlines to improve the country’s sovereign rating, which it argued is currently a major barrier to foreign direct investment. The creation of regional one-stop shops for regulatory approvals, reforms to facilitate Port City investments, and tax incentives for corporate bond issuances were among other measures advocated.
Banks also underlined the urgent need to mobilise capital for sustainable growth, recommending tax exemptions for green lending and the issuance of tax-free green bonds. Parallel proposals called for tax-free public–private partnership bonds to fund infrastructure and long-term development needs.
In a clear message of partnership, the SLBA proposed closer collaboration between government, regulators and the financial sector to deliver structural reforms. Suggested measures include integrating ports, customs, banks and revenue authorities into a unified digital platform to improve valuations and tax transparency, and creating a national data repository for climate and sustainability analytics.
Sectoral initiatives, including long-term funding for tea replanting and agricultural mechanisation, were also featured, reflecting the Association’s recognition of the need to modernise and future-proof Sri Lanka’s traditional industries.
Commenting on the submission, the SLBA said the financial services industry is ready to partner the government in shaping a resilient, inclusive and digitally empowered economy. “These proposals are designed to address immediate fiscal challenges while laying the foundation for sustainable growth. We believe this budget can be a turning point for the country, and the banking sector stands committed to play its part,” the Association noted.
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New circular issued to support disaster-affected Micro, Small and Self-Employed Businesses
A new circular has been issued by the Ministry of Finance, Planning and Economic Development to provide relief to micro, small and self-employed businesses affected by the emergency situation caused by Cyclone Ditwah. The circular has been issued in line with Circular No. 08/2025, which was introduced to restore disrupted livelihoods following the disaster.
The Government programme to empower communities affected by the disaster was introduced through Budget Circular No. 08/2025 dated December 5, 2025. Expanding this relief framework further and ensuring more effective and efficient delivery of assistance, additional circulars No. 08/2025(i) dated December 20, 2025 and No. 08/2025(iii) dated January 22, 2026 have been issued.
The social empowerment programme under the newly issued circular is structured as follows.
Assistance for affected individual, small and micro businesses
A one-time grant to restore businesses damaged by the disaster to a condition suitable for reopening.
LKR 200,000 for individual, small and micro-businesses registered with the Ministry of Industry.
LKR 200,000 for individual, small and micro-businesses registered with the Divisional Secretariat as a business entity.
LKR 50,000 for unregistered home-based businesses operated from a permanent structure.
LKR 50,000 per unit for unregistered production industries, including greenhouses.
LKR 25,000 for temporary business setups, including mobile and street hawking.
A grant will be provided to owners of the commercial buildings affected by the disaster to restore their business premises to operational condition.
A grant of Rs. 500,000/- will be provided to each business building owner who voluntarily opts to receive assistance without a damage assessment.
A grant of up to Rs. 5,000,000/- will be provided to each business building owner who opts to receive assistance after a damage assessment, based on the assessed value of the building.
In addition to the above grants, the following loan facilities have also been provided.
In addition to these grants, the Treasury has introduced a new credit scheme to provide loans for business owners whose enterprises were affected by the disaster, enabling them to restart their operations and meet essential requirements.
Accordingly:
Facilities have been provided for affected businesses to obtain loans ranging from Rs. 250,000 to Rs. 25,000,000 through the banking system at an interest rate of 3%, with a 6-month grace period and repayment over 3 years to restart their operations.
As part of the investment loans for business reconstruction, entrepreneurs whose businesses were damaged can access bank loans of up to Rs. 25 million at an interest rate of 5%, with a 12-month grace period and repayment over 10 years.
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Food safety practices should not be confined to the school curriculum alone, but must become an integral part of the attitude and daily behavioral patterns of the child -PM
Prime Minister Dr. Harini Amarasuriya stated that food safety practices should not be confined merely to the school curriculum, but should be nurtured as an integral part of a child’s attitudes and behavioral patterns.
The Prime Minister made these remarks today (28) while addressing the National Workshop on Education for Building and Strengthening a Domestic Circular Economy, held at the Galle Face Hotel, Colombo, under the Circular Economy in the Food Sector Project (2024–2027).
Implemented with financial support from the European Union, under the Global Gateway programme in collaboration with the Food and Agriculture Organization of the United Nations (FAO), the workshop aimed to identify challenges and opportunities in integrating circular economy concepts into school education; to develop practical action plans through policymakers, youth and skills development sectors, and formal education stakeholders; and to establish a educational foundation to promote sustainable circular economy practices in the food sector of Sri Lanka by 2027.
The Prime Minister stated:
“Education is not merely about passing examinations and securing employment. True education fosters a sense of responsibility and connection towards society and the environment. At present, what is most important is the concept of the circular economy, which promotes the repeated and efficient use of resources.
This concept is not unfamiliar to our ancestors. I am reminded of my grandmother, who demonstrated remarkable skill in minimizing food waste. From what we discard today such as passion fruit peels, she prepared delicious jams and chutneys. Even the metal lids of milk bottles were not thrown away. Instead, she transformed them into creative household decorations. ’Nothing should be wasted’ was a core philosophy of their way of life.
However, today, women deal with intense time pressures. Balancing employment and childcare responsibilities, food waste such as vegetables or cooked meals left unused in refrigerators has become increasingly common due to time restrictions. This should not be seen as the sole responsibility of women; rather, household responsibilities and labour must be shared collectively within the family”.
The Prime Minister further emphasized that practices such as taking only the required portion of food, cleaning one’s own plate, and developing respect for conserving resources should not remain theoretical lessons, but should be embraced as everyday life practices. She also reaffirmed that the Ministry of Education would extend its full support towards achieving this goal.
The event was attended by Carmen Moreno, Ambassador of the European Union to Sri Lanka and the Maldives; Dr. Johann Hesse, Head of Cooperation of the European Union; FAO Representative Vimlendra Sharan; along with representatives from the National Institute of Education (NIE), and a number of government and non-governmental organizations.

[Prime Minister’s Media Division]
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Cabinet nod for MOU between Sri Lanka and Romania on the cooperation in the Labour Field
Romania, a country that has maintained diplomatic relationship with Sri Lanka for several decades in various fields, has become an increasingly popular destination among Sri Lankan skilled and semi-skilled Labour categories, especially in the fields of construction, manufacturing, hospitality, and services sectors.
At present, the recruitment of Sri Lankan workers to Romania is carried out by licensed private employment agencies under the
supervision of the Sri Lanka Foreign Employment Bureau. However, since both parties have recognized the need of establishing a more organized and sustainable recruitment method due to increasing demand, the Cabinet of Ministers has approved the proposal presented by the Minister of Foreign Affairs, Foreign Employment, and Tourism to enter into a Memorandum of Understanding between the Government of the Democratic Socialist Republic of Sri Lanka and the Government of Romania regarding cooperation in the field of the labour sector with the following objectives.
• Establishment of proper mechanism for recruitment and management of workers.
• Promotion of ethical and transparent recruitment practices.
• Protection of rights and welfare of the migrant workers.
• Facilitation of regular discussions between the formal and relevant authorities ofboth countries.
• Improvement of technical cooperation, skills recognition, and capacity building in the labour sector.
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