Sri Lanka pitches stability, stellar rebound at Singapore investment forum

• Economic Development Deputy Minister Prof. Anil J. Fernando says investment-led growth key to reversing “lost decade” at Invest Sri Lanka investment forum held in Singapore yesterday organised by SEC, CSE
• Notes capital expenditure difficult but essential for growth
• Says Govt. aiming for stable policy environment; single-window for investments planned
• Lists priority sectors: energy, tourism, manufacturing, agriculture, digitalisation, logistics; nuclear, oil and gas under consideration
• CBSL Governor Dr. Nandalal Weerasinghe forecasts 5% growth for 2025 
• Says IMF targets reached ahead of expectations 
• Says State no longer crowding out private credit; inflation to stay stable
• Reserves build up organic, not debt-driven
• Notes debt restructuring completion could lift rating from CCC+ to B
• Tells investors now is the time: ‘Wait for B sovereign credit rating and it may be too late’

Labour Minister and Economic Development Deputy Minister Prof. Anil J. Fernando

CBSL Governor Dr. Nandalal Weerasinghe

Labour Minister and Economic Development Deputy Minister Prof. Anil J. Fernando yesterday told investors in Singapore that the Government was seeking to position the country as a more predictable and competitive investment destination, with fiscal discipline, regulatory reforms, and sector-specific opportunities forming the core of its strategy, 

He said this at the ‘Invest Sri Lanka’ forum in Singapore yesterday, organised by the Securities and Exchange Commission of Sri Lanka (SEC) and the Colombo Stock Exchange (CSE).

Prof. Fernando, a first-time Minister, said Government policy is focused on implementation and public interest rather than the presentation of new plans. “What matters is whether these policies can be implemented and implemented for whom, for the benefit of the public interest, and in what context,” he said. “We will never ever use this mandate to serve private interests.”

The Minister said investment-led growth is central to reversing what he called a “lost decade” in terms of technological and human capital advancement. With limited fiscal space under the IMF program, public finances are being managed under new laws, the Public Debt Management Act and the Public Financial Management Act, which impose debt and expenditure limits.

The debt-to-GDP ratio target is set at 95% by 2032, though current progress suggests the target could be met earlier. Primary expenditure, excluding interest, is capped at 13% of forecast GDP, with the primary balance target for 2024 already surpassed in the first half of the year. 

Public investment is subject to a minimum 4% of GDP cap, with 2025 capital expenditure focused on infrastructure such as roads, bridges, and digital connectivity. Budget allocations, he said, are now aligned with published fiscal strategies rather than ministerial discretion.

“What is most important is the capital expenditure or public investments. We are struggling to expedite the capital expenditure owing to inherent factors. Mainly, we happened to delay our budget due to several elections. However, we are trying hard to reach the maximum level of capital expenditure within this given time. Without the capital expenditure, it is not that easy to reach the expected growth levels,” the Deputy Minister said. 

As far as the Government policy is concerned, what we think is we invest as much as possible to develop infrastructure to enhance economic activity, improve doing business and attract investments, he said.

Revenue performance is ahead of target across Customs, Inland Revenue, and Excise Departments, aided by digitalisation. The Government aims to reduce relatively high indirect tax rates by broadening the tax base and improving administration. “If our tax base is broadened and tax administration is improved, we can reduce these taxes,” he said.

Prof. Fernando said the Government was prioritising the creation of a stable and fair policy environment for investor planning. Stock market regulation is aimed at reducing volatility and ensuring equal access to information. “Markets should not be simply driven by information that could be accessed by the very few. Publicly available information should be freely available to everyone,” he said.

Capital markets are being positioned for sustainable returns rather than speculative gains, with Government support to maintain a level playing field through regulators and the stock exchange, he added.

Commenting on the sectors open for investment, Prof. Fernando said the Government has identified energy, tourism, manufacturing, agriculture, digitalisation, and logistics as priority investment areas.

In energy, the country’s renewable and fossil fuel potential, including nuclear generation possibilities, could reach 50 gigawatts. The challenge, Fernando said, is channelling generated power effectively to demand. Reforms include unbundling the sector and enacting a new Electricity Act under the Government’s energy transition policy. The aim is to open generation, transmission, and distribution to both public and private participation without asset stripping.

In tourism, the focus is on diversifying offerings into wellness, eco-tourism, and other niche experiences to differentiate Sri Lanka in the global market.

For manufacturing, policy is geared towards higher value-added industries integrated into global supply chains. Although raw material availability is limited, opportunities exist in rare earth minerals, oil and gas exploration, and advanced manufacturing processes. 

In agriculture and fisheries, the Government wants to expand modern production techniques to tap underutilised potential.

Digitalisation is being advanced through a national digital identity project and a dedicated Digital Economy Ministry. Technology adoption is seen as essential to industrial competitiveness and investment facilitation.

In logistics, the Government is leveraging Sri Lanka’s geographic position to expand capacity and services. A cabinet-appointed committee is reviewing major project proposals, including exploring options for developing a nuclear power plant, mineral attraction and offshore oil and gas exploration.

Prof. Fernando acknowledged that pre-investment processes in Sri Lanka have been slow. The Government is bringing agencies together under a single-window system to reduce approval times. “In the past, they have been operating with their objective rather than thinking with a common platform. Now we try our level best,” he said, adding that technology would be key to streamlining procedures.

He also urged investors to consider innovation in processes and operational cycles to lower costs and improve competitiveness, noting that while products and technologies can be quickly replicated, efficiency gains in operations are harder to duplicate.

Prof. Fernando said fiscal transparency, consistent tax policy, and alignment between political and economic priorities are at the centre of the Government’s approach. “We want the political sphere to converge with the economic sphere with the common objective,” he said.

While some investments, particularly in manufacturing and resource exploration, may require long-term horizons, he argued that the country’s evolving policy and regulatory framework provides a more stable foundation than in previous years.

“I recommend that Sri Lanka is a good alternative platform for investors to invest with robust analysis,” Prof Fernando said. “Going forward, our focus is on creating opportunities, ensuring fairness, and facilitating investment through consistent, predictable policy.”

The ‘Invest Sri Lanka’ investment forum in Singapore brought together high-level Government officials, regulators, listed companies, stockbroker firms, and international investors to foster connections and promote long-term capital flows into Sri Lanka. Sri Lanka High Commissioner to Singapore Senarath Dissanayake, Asia Frontier Capital Ltd. Fund Manager Ruchir Desai, and LYNEAR Wealth Management Managing Director Dr. Naveen Gunawardane highlighted the country’s ongoing economic reforms, financial stability, and capital market potential. SEC Chairman Prof. D.B.P.H. Dissabandara and CSE Director Ray Abeywardena also addressed the forum. 11 major listed companies participated in the forum, highlighting the strength of Sri Lanka’s listed sector and the broader investment opportunity it represents.

Addressing the ‘Invest Sri Lanka’ forum in Singapore, Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe said that Sri Lanka’s post-crisis recovery is ahead of schedule, with growth exceeding baseline IMF projections, macroeconomic stability returning, and key reforms in place to sustain momentum.

He recalled how the country entered its deepest economic crisis in 2022, with inflation peaking at 70%, GDP contracting by nearly 8%, credit shrinking, and the currency falling to Rs. 370 to the US dollar. “From that point onwards, we were able to recover, and going forward, I think recovery should be much easier,” Weerasinghe said. GDP grew 5% in 2024 and is expected to expand by a similar rate in 2025, compared to the IMF’s baseline of 3% growth needed to restore debt sustainability. “We have over performed in terms of growth so far, and the economy will recover faster, and the sustainability will reach the targets much earlier than the baseline of the IMF predictions.”

The rebound has been broad-based, with agriculture, industry, construction, and services all recording steady gains. Dr. Weerasinghe attributed this to a more stable political environment, structural reforms, and improved macroeconomic management. Inflation fell from 70% in September 2022 to zero within 12 months and is now targeted at 5%, a level he described as appropriate for maintaining stability in interest and exchange rates.

Policy interest rates have been reduced from 16% to below 8%, with market rates adjusting in line. Credit to the private sector, which contracted sharply during the crisis, is now recovering, aided by reduced borrowing from state-owned enterprises (SOEs) following cost-recovery pricing reforms. “As a result, there’s a crowding-in impact for the private sector,” Dr. Weerasinghe said, adding that SOEs have begun repaying accumulated debts to banks, freeing up capital for private investment.

The Governor said Sri Lanka will record a current account surplus for the third consecutive year in 2025, marking a shift from decades of persistent deficits since trade liberalisation in 1977. The surplus is driven by stable exports, strong remittance inflows, and a tourism rebound. Official reserves have risen from $ 1.9 billion in April 2022, when usable reserves were just $ 25 million, to over $ 6 billion, with a projection of more than $ 7 billion by year-end. Unlike previous periods, the reserve build-up is “organic” and not debt-funded.

The exchange rate has stabilised around Rs. 300 after reaching Rs. 370 against the greenback during the crisis. “Predictability of a stable exchange rate is fundamental and the foundation for the stability of the businesses and any investors,” Dr. Weerasinghe said, noting that the rupee was one of the best-performing currencies in 2023–24.

On debt restructuring, the CBSL Governor said most agreements are in place, with only SriLankan Airlines’ debt pending resolution. 

Completion of the debt restructuring could lead to a sovereign rating upgrade from CCC+ to the B category. “If you wait until ratings go up to B level, it may be too late. This is the time for you to take advantage of investing in Sri Lanka,” he told investors.

Dr. Weerasinghe said fiscal discipline and revenue over-performance have created fiscal space for public investment, while the new Central Bank Act’s ban on monetary financing ensures long-term inflation stability. He noted that despite severe pressures during the crisis, the banking sector remained solvent and avoided failures, and is now well-capitalised and liquid.

“With strong external, monetary policy, and fiscal buffers in place, stability is secured,” Dr. Weerasinghe said. “The focus now should shift to growth-oriented reforms.”