Wednesday Oct 28, 2026
Wednesday Oct 28, 2026
Wednesday, 28 October 2026 00:00 - - {{hitsCtrl.values.hits}}
Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando
– Pic by Sameera Wijesingha
Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando yesterday said the Government’s capital market policies would be far more visible in the 2027 Budget, conceding that steps taken over the past two years had not been widely seen, leading some to conclude it had done little for the market.
“You will see that visibility in a bigger way in this (2027) Budget,” Dr. Fernando told the Institutional Investor Forum, ‘From Resilience to Sustainable Growth – Industry Forum 2026’, hosted by the Securities and Exchange Commission of Sri Lanka (SEC) and the Colombo Stock Exchange (CSE). The Budget proposals will be presented on 12 November, 2026.
He said most of the 12 capital market development proposals submitted by the SEC had already been discussed and accepted by the Finance Ministry. Some will be included in the Budget proposals, while the remainder will be discussed further and implemented in consultation with the CSE and the SEC.
Dr. Fernando said the Government had achieved most of its macroeconomic stabilisation targets ahead of or within the expected timeframe, earning recognition from local stakeholders, diplomatic missions, international agencies and independent rating agencies. The next task, he said, was to move beyond that phase.
“Our challenge is not to live only within stabilisation. We need to move forward from stabilisation to real transformation, where investment is much needed, both local and foreign,” he said.
He identified domestic savings as the immediate opportunity, noting a gap between savings and investment in Sri Lanka, and said the capital market had a critical role in pooling scattered savings and channelling money into the real economy.
To build an environment conducive to investment, the Government will allocate Rs. 2 trillion for capital expenditure, prioritising roads, railways, rural connectivity and networks, logistics, and some social spending. Dr. Fernando, however, conceded that existing bureaucratic systems and resources constrained the State’s ability to spend at speed, and said discussions on accelerating disbursement were already under way.
On fiscal policy, he said revenue mobilisation was well ahead of plan. The original target was to raise Government revenue to 15.4% of Gross Domestic Product (GDP) by 2030, but the country had already exceeded 16% by end-2025. This year’s target, set under ceilings referenced to the Public Financial Management Act, has been kept at around 15%, which he said could easily be reached.
Once that level is secured, Dr. Fernando said, the Government would have space to fund much-needed public investment and could then consider strategies to reset the present tax structure. He acknowledged issues in corporate income tax and individual income tax, but said rates could not be brought down at this stage without delaying revenue mobilisation. Once revenue reaches the required level, there is a possibility of reducing indirect taxation as well, he said, adding that all tax policy changes would be guided by the principles of fairness, simplicity and convenience.
Turning to State-Owned Enterprises (SOEs), he said only selected entities among the 527 classified as SOEs were engaged in commercial enterprise, with many carrying the label due to legal or other requirements.
“The Government is not interested in engaging in ordinary economic activities such as trading or running a hotel. Our main task is to facilitate,” he said.
Some SOEs will be diversified and others merged, while certain entities, including utilities such as energy, may be retained, either with private sector collaboration or solely with State investment, to prevent market manipulation. A new SOE Act would allow these entities to be reorganised under one umbrella and incorporated as companies with the autonomy to take decisions based on market conditions and risk. Dr. Fernando cautioned that the process would take time.
He also said required legal amendments would be introduced, with new Acts in the pipeline for presentation to Parliament, and that the single window project for investment facilitation through technology was nearing completion.
On monetary conditions, Dr. Fernando said interest rates were relatively high but not volatile, following decisions by the Central Bank to address external sector issues. In the long run, he said, inflation and interest rates must come down.
He flagged the Middle East crisis as an unquantifiable risk, noting that even global experts could not predict its duration or intensity, alongside the escalating global trade war, natural disasters, El Niño and climate change.
Citing the Government’s handling of recent currency pressure as evidence of its commitment to market fundamentals, Dr. Fernando said rumours of bans on motor vehicle and non-essential imports following the Middle East war had fuelled speculation, pushing the import bill up by around $ 2.5 billion a month over three to four months and putting enormous pressure on the currency. The rate prevailing at the time could not be explained by interest rate differentials, he said.
“We did not take unnecessary decisions such as pegging the currency or artificially controlling the market. We let the market run, because we had confidence in our foreign exchange inflows,” he said.
Applying the same principle to equities, he said market distortions arose when prices deviated from fundamentals, often driven by manipulation and information asymmetry, a situation where some participants hold information, including inside information, that others do not. Such practices had fostered a negative public perception of the market and made savers reluctant to invest. Regulators and stakeholders were now working to uphold fundamentals and a level playing field, he said, adding that the Government would not allow private interests to conflict with the public interest.
“We hope that next year, in addition to what we have achieved so far, there will be new developments in the capital market and more foreign investment in the capital market,” Dr. Fernando said.
Central Bank Governor Dr. P. Nandalal Weerasinghe, SEC Chairman Senior Prof. D.B.P.H. Dissabandara and CSE Chairman Dimuthu Abeyesekera also addressed the forum and took part in a panel discussion.
