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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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Environmentalists warn Sri Lanka’s ecological safeguards are failing

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Sri Lanka’s environmental protection framework is rapidly eroding, with weak law enforcement, politically driven development and the routine sidelining of environmental safeguards pushing the country towards an ecological crisis, leading environmentalists have warned.

Dilena Pathragoda, Managing Director of the Centre for Environmental Justice (CEJ), has said the growing environmental damage across the island is not the result of regulatory gaps, but of persistent failure to enforce existing laws.

“Sri Lanka does not suffer from a lack of environmental regulations — it suffers from a lack of political will to enforce them,” Pathragoda told The Sunday Island. “Environmental destruction is taking place openly, often with official knowledge, and almost always without accountability.”

Dr. Pathragoda has said environmental impact assessments are increasingly treated as procedural formalities rather than binding safeguards, allowing ecologically sensitive areas to be cleared or altered with minimal oversight.

“When environmental approvals are rushed, diluted or ignored altogether, the consequences are predictable — habitat loss, biodiversity decline and escalating conflict between humans and nature,” Pathragoda said.

Environmental activist Janaka Withanage warned that unregulated development and land-use changes are dismantling natural ecosystems that have sustained rural communities for generations.

“We are destroying natural buffers that protect people from floods, droughts and soil erosion,” Withanage said. “Once wetlands, forests and river catchments are damaged, the impacts are felt far beyond the project site.”

Withanage said communities are increasingly left vulnerable as environmental degradation accelerates, while those responsible rarely face legal consequences.

“What we see is selective enforcement,” he said. “Small-scale offenders are targeted, while large-scale violations linked to powerful interests continue unchecked.”

Both environmentalists warned that climate variability is amplifying the damage caused by poor planning, placing additional strain on ecosystems already weakened by deforestation, sand mining and infrastructure expansion.

Pathragoda stressed that environmental protection must be treated as a national priority rather than a development obstacle.

“Environmental laws exist to protect people, livelihoods and the economy,” he said. “Ignoring them will only increase disaster risk and long-term economic losses.”

Withanage echoed the call for urgent reform, warning that continued neglect would result in irreversible damage.

“If this trajectory continues, future generations will inherit an island far more vulnerable and far less resilient,” he said.

Environmental groups say Sri Lanka’s standing as a biodiversity hotspot — and its resilience to climate-driven disasters — will ultimately depend on whether environmental governance is restored before critical thresholds are crossed.

By Ifham Nizam ✍️

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IGP warns cops against presenting hampers or gifts to superiors

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IGP Priyantha Weerasooriya has issued a letter, warning police officers against presenting gifts to senior officers during festivals or special occasions.

The letter, dated December 24, notes that some officers have reportedly offered hampers to senior officers during events such as the New Year and Sinhala and Hindu New Year, and some senior officers have accepted them.

The IGP has stressed that no officer should present hampers to him or any other senior police officer under any circumstances, and that senior officers must not accept such gifts.

Instead of in-person visits or physical gifts, officers have been instructed to convey their greetings through phone calls or WhatsApp messages, with personal visits deemed unnecessary.

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Ravi K urges slash of politicians’ perks to fund national relief and reconstruction

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MP Ravi Karunanayake speaking to the media on Thursday

NDF MP Ravi Karunanayake has called for the savings from MPs’ insurance coverage and allowances to be redirected to a relief fund for the public.

Addressing a press conference in Colombo on Thursday, Karunanayake stressed that the coverage reserved for MPs should be withdrawn and the funds transferred to a welfare and disaster relief fund. He mphasised that money allocated for double-cab vehicles for politicians should also be diverted to the national reconstruction fund at this critical time.

Highlighting the country’s ongoing economic and crisis situation, Karunanayake said that public representatives and senior state institutions must make significant sacrifices, and the perks and insurance benefits of MPs should be used for the welfare of the people.

He underlined that the task of rebuilding the country must start with the politicians themselves.

Commenting on state institution inefficiencies, he stated:

“Bonuses and allowances paid to officials of loss-making institutions such as SriLankan Airlines must be immediately stopped. Those funds should be redirected for the welfare of ordinary citizens currently under severe hardship—this is the responsibility of the government.”

Regarding Sri Lanka’s current foreign currency reserves, Karunanayake pointed out that, relative to their expenditure, there is no mechanism in place to replenish them—a serious problem. He urged that export performance be increased rapidly. He also suggested that renewable energy be used instead of oil-based electricity generation to save foreign exchange.

Karunanayake further revealed that, given the country’s ongoing disaster conditions, sufficient foreign aid has not yet been received. He recalled that the sixth tranche of the International Monetary Fund (IMF) was due to be received in December and stated that obtaining relief in installments would be more beneficial to the country than seeking emergency loans.

On dealing with the IMF, he added:

“Even if the IMF comes through under Ranil Wickremesinghe, we must ensure we engage properly and clearly with them. We must stick to our terms and execute them without confusion or compromise.”

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