Sri Lankan government gives biggest boost to unleash digital economy
Daily FT: The 2026 Budget presented yesterday by President and Finance Minister Anura Kumara Disanayake has given a big boost for Sri Lanka’s aspiration of becoming a digital economy.
The Government will invest Rs. 35.6 billion to advance digitisation across the country with Disanayake expecting these measures to promote inclusive digital access.
The President said Sri Lanka has a high potential to emerge as a regional hub for setting up data centres. “There are many crucial steps that we need to take in attracting investments in data centres. To encourage these investments, an attractive environment should be created in this sector for foreign and local investors through financial incentives, green energy use incentives, low-cost electricity at the initial stage, and concessional provision of necessary land,” the President said. As an initial step, it is proposed to allocate Rs. 500 million for 2026.
He also said to accelerate the spread of digital technology, a simpler and faster unique approval process will be established for the construction of digital infrastructure facilities such as communication towers. It is proposed to suspend the tax applicable to new towers constructed under this digital technology expansion program for a period of five years.
To attract investment, a fund will be established in 2026 to accelerate the growth of the start-ups ecosystem. An initial Government grant of Rs. 1.5 billion has been allocated under the Ministry of Digital Economy expenditure head for the establishment of the fund.
It is also proposed to establish “Virtual Special Economic Zones” through the Board of Investment to practically operate in Sri Lanka, generating exports and employment.
He revealed that the first digital National Identity Card will be issued early next year saying the move will not be thwarted by short-sighted and unfounded critics.
Additionally, Rs. 750 million has been allocated to establish an AI data centre.
He also said that all Government payments will be integrated into a digital payment system with service waived and QR payment charges lifted on payments below Rs. 5,000.
To improve internet coverage construction of transmission towers will be incentivised with grant of tax waiver for five years. A broadband voucher will be provided to children from Aswesuma beneficiary households to enhance online education.
Two new dedicated IT zones are planned for establishment in Digana and Nuwara Eliya under the Board of Investment (BOI) in addition to reactivating those in Galle and Kurunegala.
OSL take:
Sri Lanka’s ongoing digitization drive and the commitment towards transforming the country into an e-economy have created many business/investment opportunities for foreign businesses/investors on the lookout for lucrative ventures in the region, especially in Sri Lanka. The Sri Lankan government is committed to digitizing all sectors of the country as part of Sri Lanka’s drive towards becoming a hub in the South Asian region. This has resulted in the opening of sectors related to the digital industry while also providing incentives to businesses entering the industry. The growth and profits recorded by businesses already engaged in the digital industry as well as related sectors in the country and the increasing interest among foreign businesses/investors to explore the expanding opportunities in the industry, indicate the increasing business potential in the industry as well. Given all these developments, foreign businesses/investors could confidently explore the expanding business/investment opportunities in Sri Lanka’s digital industry and related sectors. Foreign businesses could also look at further expanding operations through partnerships or joint ventures with local businesses in the industry.
| Article Code : | VBS/AT/20251110/Z_4 |