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Budget 2026: Bankers present proposals to drive recovery

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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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Delay in govt. response to UK sanctions on ex-military chiefs, and others causes concern

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General Silva / Admiral Karannagoda

Admiral of the Fleet Wasantha Karannagoda said that he is still waiting for the government’s response to the UK sanctions imposed on three ex-military officers, including him, and a former member of the LTTE.

The former Navy Chief said so in response to The Island query whether he was aware of the position taken by a three-member ministerial committee, consisting of Foreign Minister Vijitha Herath, Justice and National Integration Minister Harshana Nanayakkara and Deputy Defence Minister Maj. Gen (retd) Aruna Jayasekera.

The government named the committee in the wake of the UK declaration of travel bans and asset freezes in respect of Karannagoda, General Shavendra Silva, General Jagath Jayasuriya and Vinayagamoorthy Muralitharan, also known as Karuna. Maj. Gen. Jayasekera said that they inquired into the issue at hand.

Karannnagoda said that he would like to know the government’s recommendations if the ministerial committee briefed the Cabinet as per a decision taken by the Cabinet of Ministers. Karannagoda said that the issue should have been taken at the highest level as various interested parties continue to humiliate the war-winning military by targeting selected individuals.

Other sources, familiar with the issues at hand, told The Island that the government was yet to announce its stand.

Sources pointed out that the Opposition has been silent on what they called a matter of utmost national importance.

Cabinet spokesman Dr. Nalinda Jayathissa is on record as having described the UK move as a unilateral move and that committee was formed to examine the developments and recommend appropriate measures to the Cabinet.

Foreign Minister Herath told The Island the government was not successful in getting the British to withdraw sanctions. Describing the UK decision as unilateral, the Miniser said that the government conveyed its concerns but the UK didn’t change its stand.

The Island raised the issue with Minister Herath and Admiral Karannagoda in the wake of British MP of Sri Lankan origin, Uma Kumaran requesting the UK Foreign Secretary Yvette Cooper to expand on the government’s sanctions imposed on the four above-mentioned persons.

During a Foreign Affairs Committee meeting on 16 December, the MP for Stratford and Bow highlighted the lack of accountability and political will from the current Sri Lankan government to address war crimes and mass atrocities committed in Sri Lanka.

Sources said that David Lammy, who served as Secretary of State for Foreign, Commonwealth and Development Affairs at the time of the declaration of sanctions, had no qualms in declaring that the action taken against four Sri Lankans was in line with a commitment he made during the election campaign to ensure those responsible wouldn’t be allowed impunity. The UK government statement quoted Lammy as having said that this decision ensured that those responsible for past human rights violations and abuses were held accountable.

By Shamindra Ferdinando

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Sri Lanka outlines seven key vectors of international cooperation at Moscow forum

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Shobini

Sri Lankan Ambassador to the Russian Federation, Shobini Gunasekera recently presented a conceptual framework of seven key vectors that defined contemporary international relations and facilitated dialogue among States. She made the presentation at XI Moscow International Financial and Economic Forum held under the theme “Building Bridges: Partnership without Borders”.

In her address, the Ambassador emphasised that these vectors represent the channels through which ideas circulate, trade expands, and peace is strengthened, serving as guiding principles for cooperation amid global uncertainties. The seven key vectors highlighted were economic ties as a foundation for long-term stability; political choice and diplomacy through dialogue and multilateral engagement; security cooperation to address cross-border threats; cultural linkages through education, tourism, and professional exchanges; technological advancement, particularly in digital systems and artificial intelligence; environmental stewardship through collective action on renewable energy and climate change; and humanitarian obligations, including disaster relief and development cooperation.

 Drawing on Sri Lanka’s experience, the Ambassador illustrated the practical application of these principles by highlighting the country’s strategic location in the Indian Ocean, its role as a trade and logistics hub, and its active engagement in regional groupings such as BIMSTEC and the Indian Ocean Rim Association, where the Russian Federation serves as a Dialogue Partner.

 The potential for enhanced Sri Lanka–Russia bilateral cooperation was underscored, particularly through complementarities between Russia’s technological and energy expertise and Sri Lanka’s logistical capabilities and maritime infrastructure. She noted that such synergies could support joint initiatives in trade, innovation, tourism, and logistics, while cultural and scientific exchanges would further strengthen mutual understanding between the two countries.

Concluding her remarks, the Ambassador stated that sustained progress requires dialogue, mutual respect, and forward-looking partnerships capable of shaping a shared and stable future.

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Sri Lanka third most preferred destination for Indians

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Thailand takes top place

Travel website Make My Trip has named Sri Lanka as the third most booked international destination by Indian travellers for the festive period, following Thailand and the United Arab Emirates (UAE).

According to a report released by MakeMyTrip, an analysis of booking trends between 20 December and January 2026 compared to the same period last year, highlighted a growing interest in Sri Lanka as a preferred destination.

Thailand ranked first, while the UAE secured second place. Vietnam recorded a notable rise, moving from seventh position last year to fourth this year, followed by Malaysia, Indonesia, Singapore, the UK, the US, and Hong Kong.

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