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Verité Research unveils 10 budget proposals for revenue and growth

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Pre-budget forum focuses on the pathway to revive Sri Lanka’s economy

Ahead of the presentation of the budget for 2024 to Parliament today (13 November), Verité Research has unveiled 10 Budget proposals designed to enhance revenue and revitalise growth in Sri Lanka.The proposals were announced at a forum titled ‘Budgeting for Revenue and Growth’ hosted by the think tank on Thursday (9), which facilitated a conversation on the pathway to revive Sri Lanka’s economy.

The forum featured presentations by Professor Mick Moore from the Institute of Development Studies – UK, Professor Shanta Devarajan from Georgetown University, Professor Udara Peiris from Oberlin College and Verité Research’s Executive Director Dr. Nishan de Mel, Research Director Subhashini Abeysinghe, Lead Economist Raj Prabu Rajakulendran, Lead Economist Mathisha Arangala and Lead Data Analyst Ashvin Perera.

In his opening remarks, Nishan de Mel underscored the importance of reducing interest costs while increasing revenue for sustainable economic recovery. He noted that the interest cost for 2024 projected in the upcoming Budget was LKR 234 billion higher than what was envisaged in the current IMF agreed economic recovery plan.  He showed that Sri Lanka will continue to have the highest ratio in the world of interest cost to government revenue: currently above 70%, and remaining above 60% based on the projected 2024 budget.

The forum presented five proposals aimed at increasing revenue:

1.Increase the withholding tax rates from the existing 5% to 10%. – the proposal is expected to yield an additional LKR 90 billion.

2.Adopt the published rational formula for indexing cigarette taxes – the proposal is expected to add over LKR 35 billion.

3.Reverse sugar tax reduction and remove executive discretion on tax changes – the level of discretion allowed through the Special Commodity Levy Act, to the minister, led to what is commonly referred to as the ‘sugar scam’, immediately rectifying it (as had just taken place) can add over 25 billion.

4.Recover excess costs of Ceylon Petroleum Corporation through an increased tax on the whole industry rather than an increased price, above the internationally indexed formula, by the entity – the proposal will generate about LKR 25 billion in extra taxes collected from competing producers.

5.Implement the described method to estimate and collect property taxes – the proposal will initially increase tax collection by at least LKR 17 billion.

The next segment of the forum presented five proposals aimed at revitalising the economy:

1.Introduce state-funded maternity leave benefits (MLBs) – The private sector currently bears the full cost of maternity benefits, making it costlier to employ women. Research shows that state funded maternity leave reduces discrimination in recruitment, and boosts female labour force participation.

2.Protecting the poor with cash transfers and reforming state subsidies – better targeted transfers protects the vulnerable, and makes the allocation of subsidies more efficient, and effective.

3.Implementing trade facilitation targets — Sri Lanka has requested external assistance for 69% of the trade measures while least developed countries have, on average, asked for assistance for just 40% of the measures. Proposals were described to increase pro-active implementation.

4.Accede to the Madrid Protocol on trademark registration – this gives a much needed boost for exporters to go global with high-margin, value-added products, as it would Increase the speed and ease of international trademarks registration.

5.Actions to protect the Banking sector – Addressing banking sector risks requires joint actions from the central bank, the government and the International Monetary Fund (IMF) to implement proposals that include raising the deposit guarantee limit, establishing a Financial Stability Fund for liquidity injection during bank failures, and creating an asset management company for non-performing loans.

The segment on enhancing revenue was followed by a panel discussion featuring Nishan de Mel, Subhashini Abeysinghe, Professor Mick Moore and Professor Shanta Devarajan. The session was moderated by Inoshini Perera, Strategic Advisor to the Executive Director at Verité Research. The discussion highlighted the need to improve Sri Lanka’s risk perception to reduce its cost of borrowing, emphasising the need for better governance, including the restriction of discretionary powers in the executive arm of government. The panel also discussed the need to shift the composition of public expenditure on growth-promoting activities.

The segment on revitalising the economy was followed by a panel discussion that featured Nishan de Mel, Subhashini Abeysinghe, Professor Shanta Devarajan, Professor Udara Peiris and Country Managing Partner at Ernst and Young Sri Lanka Duminda Hulangamuwa. The session was moderated by Hemas Consumer Brands – Managing Director Sabrina Esufally. The panel emphasized the need for Sri Lanka to diversify its export sectors, reduce barriers to international trade, and seize economic opportunities in tourism, IT, ports and shipping infrastructure. The discussion also touched on the importance of addressing inefficiencies in tax collection and institutional processes.

Concluding the session, Nishan de Mel stressed the need for collective engagement and urgent attention to implement these proposals, among others, so that Sri Lanka might stave off a second debt episode of debt restructuring, and make the current recovery path effective and sustainable.



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Heat Index at Caution Level in the Northern, North-central, Eastern, Sabaragamuwa and North-western provinces and in Colombo, Gampaha, Hambantota and Monaragala districts during the day time

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Warm Weather Advisory
Issued by the Natural Hazards Early Warning Centre
Issued at 3.30 p.m. on 03 May 2026, valid for 04 May 2026.

The Heat index, the temperature felt on human body is likely to increase up to ‘Caution level’ at some places in the Northern, North-central, Eastern, Sabaragamuwa and North-western provinces and in Colombo, Gampaha, Hambantota and Monaragala districts during the day time.

The Heat Index Forecast is calculated by using relative humidity and maximum temperature and this is the condition that is felt on your body. This is not the forecast of maximum temperature. It is generated by the Department of Meteorology for the next day period and prepared by using global numerical weather prediction model data.


Effect of the heat index on the human body is mentioned in the above table and it is prepared on the advice of the Ministry of Health and Indigenous Medical Services.

ACTION REQUIRED
Job sites: Stay hydrated and takes breaks in the shade as often as possible.
Indoors: Check up on the elderly and the sick.
Vehicles: Never leave children unattended.
Outdoors: Limit strenuous outdoor activities, find shade and stay hydrated.
Dress: Wear lightweight and white or light-colored clothing.

Note:
In addition, please refer to advisories issued by the Disaster Preparedness & Response Division, Ministry of Health in this regard as well. For further clarifications please contact 011-7446491.

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USD 3.7 bn H’tota refinery: China won’t launch project without bigger local market share

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China has declared that China Petroleum and Chemical Corporation (SINOPEC) will not proceed with the USD 3.7 bn Hambantota oil refinery project unless a consensus could be reached on the percentage of the output that could be sold in the local market.

China has informed the NPP government that SINOPECwill not be able to sustain the project in terms of the original agreement that stipulated that 80% of the output be exported and 20 % sold in the Sri Lankan market, according to sources familiar with the issue.

Once fully operational, the strategic facility will be able to process 200,000 barrels of crude oil a day. The proposed facility, together with the Hambantota International port, which was taken over by China in 2017 on a 99-year lease, emphasise significant Chinese presence in the country.

SINOPEC with about 12% market share is among the foreign companies engaged in fuel distribution in Sri Lanka at the moment. Other foreign players are Lanka India Oil Company (LIOC) and joint venture by Shell Brands International AG (Shell) and RM Parks (Private) Limited, the latter being the latest entrant.

LIOC entered the market way back in 2003 during Ranil Wickremesinghe’s tenure as the Prime Minister. LIOC holds the second biggest market share with 211 fuel stations with SINOPEC being third and joint Shell Brands International AG (Shell) and RM Parks (Private) Limited in fourth place. CPC remains the market leader with some 800 odd fuel stations countrywide.

Sources said that whatever the Chinese and Sri Lankan government representatives said in public the launch of the project primarily would depend on a new formula. The Island learns that the Chinese expect to sell 30% of the output here. “The Chinese are of the view that 20% share is not sufficient to sustain the project,” sources said.

Sri Lanka and China in January 2025 announced plans for the SINOPEC project dubbed the largest single Chinese direct investment here following President Anura Kumara Dissanayake’s three-day state visit to Beijing. Dissanayake’s delegation included Minister of Foreign Affairs, Employment and Tourism Vijitha Herath, Minister of Transport, Highways, Ports and Civil Aviation Bimal Rathnayake, and Sri Lankan Ambassador to China, Majintha Jayesinghe. Outspoken Chinese Ambassador to Sri Lanka Qi Zhenhong was also present at all key meetings with representatives of China Petrochemical Corporation (SINOPEC Group), China Communications Construction Company Ltd (CCCC), China Merchants Group (CMG), Huawei, and BYD Auto, a leading company in the automobile manufacturing sector.

Pointing out that Sri Lanka and China hadn’t been able to resolve the knotty problem for about 15 months, sources said that Sri Lanka was also under pressure from India to expedite the Trincomalee oil tank farm development project. Sri Lanka finalized an agreement with India and United Arab Emirates (UAE) in early April 2025 to develop Trincomalee as an energy hub.

Sources said that in line with the overall plans involving China as well as India-UAE, Sri Lanka was required to enhance the fuel storage facilities as soon as possible. The ongoing West Asia conflict underscored the responsibility on the part of the incumbent dispensation to take tangible measures to enhance storage facilities.

The Trincomalee and Hambantota projects could be on a collision course, sources said. The likelihood of Indo-Lanka agreements in respect of WW two era oil tank farms in Trincomalee, particularly the one negotiated during Gotabaya Rajapaksa’s presidency having animpact on the Hambantota oil refinery couldn’t be ruled out, sources said.

President Dissanayake during his May Day address disclosed the crisis faced by his government in ensuring uninterrupted oil supplies. Dissanayake said that the government had no option but to increase fuel quotas given to various categories in view of the arrival of fuel ships in Colombo as Sri Lanka lacked storage facilities.

Sources said that energy insecurity was at stake due to the continuing instability in the global markets caused by US actions in Hormuz Strait.

Newly-appointed Energy Minister Anura Karunathilake is believed to be engaged in consultations with relevant parties. Earlier Punyakumara Dissanayake who resigned recently over the coal scam handled the Hambantota refinery matter.

by Shamindra Ferdinando

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Administrators oppose govt. move to deploy Clean Sri Lanka agents in District and Divisional Secretariats

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The Sri Lanka Association of Divisional Secretaries and Assistant Divisional Secretaries (SLADA) has written to the Secretary to the President requesting the withdrawal of a decision to appoint “Clean Sri Lanka” coordinators at provincial, district and divisional levels, warning that it could seriously undermine the independence of the public service.

In a letter, signed by SLADA President R. Senthil and Secretary R. M. Nuwan C. Hemakumara, the Association has referred to a directive issued by the Secretary to the President, dated March 20, 2026, instructing District Secretaries to appoint coordinators for the programme and to provide them with facilities within Divisional Secretariat offices.

The Association has noted that Sri Lanka already has a long-established administrative framework to ensure effective public service delivery, spanning ministries, departments, provincial councils, district and divisional secretariats down to Grama Niladhari divisions. This system is supported by internal audit units, the National Audit Office, and coordination committees at divisional, district and national levels, which oversee and review programme implementation.

The SLADA has acknowledged that specific officers have already been assigned at divisional level to implement activities under the government’s Clean Sri Lanka initiative, which is being monitored

through existing community development committees and coordination mechanisms.

The association has expressed concern over the appointment of separate coordinators at district and divisional levels and the instruction to allocate office space and attach public officials to support them. It has argued that divisional secretariats are neutral public service institutions that provide services to all citizens without political, religious or ethnic bias, and that their independence must be safeguarded.

While acknowledging some isolated instances of politically influenced conduct by a small number of officials, SLADA stressed that the overall administrative structure has functioned as an independent and depoliticised system that has earned public trust.

The association further pointed out that the current government’s policy framework emphasises efficient and impartial public service delivery without interference in the independence of state institutions.

It has warned that appointing politically connected coordinators within divisional secretariats and attaching government-paid officials to them could seriously compromise administrative neutrality and may also raise legal concerns.

SLADA said previous attempts to introduce similar arrangements had been resisted, adding that the current system already allows for effective coordination, monitoring and review of government programmes, including Clean Sri Lanka.

Accordingly, the Association urged the President’s Secretary to revoke the decision and allow existing administrative mechanisms to handle programme implementation. It warned that any such precedent could have long-term adverse implications for the independence of the public service, and expressed hope for a reconsideration of the directive, stating that it would not cooperate with the current arrangement unless the request is addressed.

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