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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.
News
National Audit Office reveals NHSL lapses
Reagent scandal:
Deputy Director of the National Hospital, Dr. Rukshan Bellana, has been interdicted by Health Service Committee (HSC) of the Public Service Commission (PSC) following a preliminary inquiry into several complaints received against him, government sources said.
They said certain matters referred by the Secretary to the Prime Minister Dr. Harini Amarasuriya and Inspector General of Police (IGP) Priyantha Weerasooriya, too, had been taken into consideration.
A Health Ministry official said there was no truth in Dr. Bellana’s claim, as reported in the 30th December edition of The Island, that the Health Ministry had sacked him on the approval of the HSC of the PSC over him taking up the massive Rs 900 mn fraud involving the supply of chemical reagents to the laboratory of the National Hospital of Sri Lanka (NHSL) in Colombo, which is the premier hospital in the country.
Sources said that there was absolutely no basis for this allegation. The official said that Dr. Bellana had been interdicted for issuing statements that caused controversy and turmoil among the public. That’s the most serious offence that had been taken into consideration when the decision to interdict him was taken, sources said. “There will be a spate of charges in the charge sheet to be issued soon.”
The interdiction of medical officers could not be carried out by the Ministry of Health and Mass Media, as the Ministry was not vested with disciplinary authority, sources added.
Dr. Bellana said he stood by what he revealed and had evidence to support his claim.
Health Ministry sources acknowledged that the National Audit Office (NAO) on June 6, 2025, had called for information in respect of chemical reagents procured by the National Hospital Colombo NHSL laboratory from 2022 to 2024.
Responding to another query, sources said that a separate investigation by the Internal Audit of the Ministry of Health was on into issues raised by the Audit query pertaining to the lab of the NHSL.
Having pointed out that the government paid Rs. 894,186,168 (2022), Rs. 713,652,615 (2023) and Rs. 936,152,767, totalling Rs 2,543,991,550 for chemical reagents during that period, NAO sought an explanation from the Health Ministry as to how Rs 12,894,697 worth of chemical reagents past expiry dates were found in six laboratories at NHSL during examination carried out on April 7,8,10,21 and 22 in 2025.
The NAO also raised the failure on the part of the relevant authorities to secure the approval of the Medical Supplies Division (MSD) before placing orders with local suppliers for chemical reagents.
The Health Ministry was questioned over the absence of proper stock keeping regarding Rs 2544 mn worth chemical reagents issued to NHSL laboratories. The NAO ascertained that Financial Regulations 751 had been violated. As a result of the absence of credible stock keeping, the NAO hadn’t been able to ascertain whether shelf-life expired chemical reagents were misused, the government authority stated.
The NAO asked for an explanation regarding the payment of Rs 912,838 over the required amount to a local private supplier (NAO named the supplier) for chemical reagents obtained.
In one of the most serious observations, NAO pointed out that shelf-life expired chemical reagents had been used for tests. The NAO raised this while pointing out the Health Ministry violated a key prerequisite in the procurement of chemical reagents that their shelf life should be at least 85% at the time of receiving consignments. Instead, all stocks procured had less than six months shelf life, NAO stated.
NAO declared that some suppliers refrained from mentioning the date of manufacture and the time of expiry.
The above mentioned were some of the issues that had been raised by Audit Superintendent Y.M. Sugathadasa on behalf of the Auditor General who is the head of the NAO. The post of AG remains vacant since December 8, 2025. Earlier incumbent W.P.C. Wickremeratne retired on April 8, 2025 after having served as AG for several years. President Anura Kumara Dissanayake and the Constitutional Council haven’t been able to reach consensus on a permanent appointment yet.
By Shamindra Ferdinando ✍️
News
NPP’s CMC budget passed after four Opp. members switch allegiance
The Opposition has claimed that the government forced three of its Colombo Municipal Council members to to skip yesterday’s vote on the annual budget of the Council. The three councillors who voted with the SJB-led Opposition on 22 Dec., to defeat the NPP, skipped yesterday’s vote.
Two of them didn’t turn up yesterday while the other one left the Council early, claiming his wife was not well. One of the four SLMC councillors switched his allegiance to the NPP. having voted with the Opposition on 22 Dec.
As a result, the CMC’s annual budget was passed with a majority of two votes.
The budget proposal received 58 votes in favour, while 56 councillors voted against it. Last week, the Opposition obtained 60 votes to defeat it, while the NPP managed to secure only 57.
When the 2026 budget of CMC was first presented to the council on 22 December, 60 councilors voted against it while 57 members voted for the budget.
In the last Local Government Elections, the NPP secured power in the CMC and its mayoral candidate Vraie Cally Balthazar was elected as the Mayor of Colombo by securing 61 votes. (SF)
News
600MW hit to national grid as two Norochcholai units go offline
Sri Lanka’s power system has suffered a major setback with two of the three generators at the coal-fired power plant at Norochcholai going out of service, cutting around 600 megawatts from the national grid, even as Energy Ministry officials stressed yesterday that the issue is minor and fully under control.
One unit has been offline since November for scheduled major maintenance carried out once every three years, while another was shut down following a technical fault in its boiler. As a result, only one generator, at the country’s largest and only coal-fired power station, is currently supplying electricity to the grid.
Despite the sharp reduction in coal-based generation, a senior spokesperson for the Norochcholai Power Plant assured that there would be no disruption to electricity supply, as hydroelectric power generation is being increased to compensate for the temporary shortfall from Norochcholai.
Ministry of Power and Energy officials also confirmed that the situation is not serious and does not pose a risk to the stability of the national grid. “This is a minor technical issue and routine maintenance activity. There is no cause for public concern,” a senior Ministry official said.
Meanwhile, a top official of the Ceylon Electricity Board (CEB) said all three units of the Norochcholai Power Plant are expected to be restored by the first week of January, delivering the full 900MW capacity back to the national grid.
“Current reservoir levels are favourable, allowing us to rely more on hydropower during this period,” the CEB official said, adding that system operations are being closely monitored.
A senior electrical engineer told The Island that one unit had been shut down in November for routine maintenance, while another unit suffered an unexpected breakdown earlier this week. “Such incidents are not unusual in large thermal power stations. Corrective work is already under way and the units will be brought back online as scheduled,” he said.
Norochcholai remains the backbone of Sri Lanka’s base-load electricity generation, and while prolonged outages could place strain on the system during dry periods, officials reiterated that current conditions and contingency measures are adequate to ensure uninterrupted power supply until full operations resume.
By Ifham Nizam ✍️
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