Saturday Oct 03, 2026
Saturday Oct 03, 2026
Saturday, 3 October 2026 00:38 - - {{hitsCtrl.values.hits}}
The Free Trade Zone Manufacturers’ Association (FTZMA) yesterday urged the Government to offer non-resident shareholders a tax credit equal to the 15% dividend tax if they reinvest profits in Sri Lanka.
The proposal was included among a set of Budget 2027 proposals aimed at strengthening the country’s foreign exchange earnings.
The dividend tax on non-resident shareholders was introduced in 2023. Under the FTZMA proposal, the credit would apply to three forms of reinvestment: retaining profits in the existing business without paying dividends, declaring dividends and reinvesting them in the same business as equity, and declaring dividends and reinvesting them in other business ventures in Sri Lanka.
The Association grounded its proposals in the country’s external position, noting that the current account, which tracks the country’s net earnings from trade, services, income and transfers with the rest of the world, has been in deficit for four consecutive months.
It recorded a shortfall of $ 387 million in the first seven months of the year, against a surplus in the same period last year, and a single external shock swung the balance by close to $ 1.7 billion in six months, the FTZMA said.
It pointed out that the debt repayment schedule for the coming decade is fixed by contract, while the earnings needed to meet it are not. “Sri Lanka has never had difficulty finding lenders. Finding new earnings has been the harder task, and it is the one Budget 2027 must now take up,” the Association said.
The FTZMA said a fiscal deficit is a shortage of rupees that can be met through domestic revenue, whereas the external deficit can only be closed by what the country earns, retains or attracts from abroad. Central Bank rules on foreign exchange liquidity determine how existing dollars are allocated, but cannot generate new ones, it added.
On infrastructure, the Association called on the Government to prioritise development of Free Trade Zones, arguing that new investors expect plug-and-play facilities and integrated logistics before installing machinery.
It identified expressway access and water supply as urgent needs for rural Export Processing Zones (EPZs), and proposed developing them as industrial townships with full amenities. With several new EPZs planned, the FTZMA urged the Government not to replicate the blueprint of existing zones, which it said need better external logistics and amenities and the modernisation of ageing, dilapidated internal infrastructure to support expansion, reinvestment and new investment.
The Association also proposed a common national test, termed Net Foreign Currency Contribution, to measure the foreign exchange an activity actually leaves in the country after deducting the outflows it causes, such as imported inputs, equipment, overseas services, software, licence fees and finance costs. The measure would also count foreign exchange saved, for instance when a local supplier replaces an imported input, and would allow results to be published and verified.
Central to its submission is a call for a standing national mechanism to identify new sources of foreign exchange, structured in three stages.
The first would invite ideas for earning or retaining foreign exchange from anyone in the country or among Sri Lankans abroad, along with submissions on regulations blocking such activity.
The second would provide a single entry point with a short initial submission testing an idea’s foreign exchange logic and practical readiness, without requiring a full business plan upfront.
The third would assign a named officer to own each credible case, coordinate the agencies involved within fixed time limits and carry it through to a decision, with reasons for rejection given in writing.
The FTZMA stressed it was not seeking automatic approvals or a new large institution. “A small team with the authority to get answers out of other agencies would achieve far more than a new department with none,” it said.
