Mr President, when we talk to our members and investors, what they mention is that to move beyond 5% growth—or even to sustain 5% given the international challenges and the existing economic structure—it is somewhat difficult to make that journey under the current setup. There is a view that this needs to change. Questions are frequently raised about the capacity of the state machinery and whether it is sufficient. Our dialogue today is built around these foundational themes. I would love for you to start from a topic of your choice, and we can take our conversation forward from there.
The rural economy
The rural economy. One thing you have consistently emphasized, even before coming into power, is that we must strengthen the rural economy. This shouldn't be done by bringing rural people into Colombo, but rather by expanding the economy in those local areas. Unfortunately, when you assumed office, you inherited a government where poverty stood at 25%. So the question, Mr. President, is: those receiving Aswesuma account for 25%—in terms of population, about 5 million people, or roughly 1.5 million families. How do we bring these people into the mainstream economic flow? Do we continue providing assistance in this manner indefinitely? How do we integrate them? Could you share your perspective on the agricultural economy and small and medium enterprises?
Dissanayake: Good evening to everyone. Bingumal, regarding the issues you raised during our previous meeting, I believe the points we presented then have achieved a considerable measure of success today. Now we have to enter a new phase. In this phase, our primary challenge is the eradication of rural poverty. A recent World Bank report indicated that rural poverty remains at around 16.9%. Eradicating rural poverty is not something that can be completed in a year or two like building a ladder or constructing a road. It requires a targeted, relentless program.
Furthermore, in any country at any given time, there is a segment of the population that a government must look after. That cannot be reduced entirely to zero. In every country, there is a community of people who cannot participate in the economy due to various vulnerabilities and insecurities, and they must be cared for. Therefore, not everyone will become active participants in the mainstream economy. In every nation, there is a social group that must be supported by the government and society through a social safety net.
The question before us is whether that group is excessively large or beyond manageable proportions. The answer is yes. We have had to support a group that ideally shouldn't require government aid. There are several reasons for this, chief among them being our failure to create new economic opportunities for rural citizens. What economic opportunities do they currently have? Rural citizens have very limited economic options—either agriculture, marine and freshwater fisheries, or running small retail shops. These constitute their limited avenues.
Therefore, the first challenge in eradicating rural poverty is: how do we create new economic opportunities for them? Looking at the diversity of our agriculture across small land plots, historically our agriculture was always a subsistence economy, never a commercial one. For the vast majority of farmers, it was purely subsistence. Given our land area and resource constraints, we cannot build a massive commercial agricultural model for every individual farmer.
Agriculture must be conceived as a program for food security rather than an individual farmer-targeted poverty alleviation program alone. In that case, we face the challenge of creating new economic opportunities for the rural population. First, enabling them to self-generate economic opportunities. The barriers they face include a lack of capital, lack of technology, lack of management skills, and lack of market access. Our responsibility is to fulfill these requirements. We have already launched a collateral-free loan scheme. Since they lack financial assets or collateral to pledge at banks, this collateral-free loan scheme has proven successful. I believe we have disbursed nearly 18 billion rupees under this collateral-free credit program. We must foster new entrepreneurs and integrate technology into their operations. That is one aspect—self-creating economic opportunities.
Secondly, state-generated wealth must be pushed down to the rural population. Wealth accumulated in the Consolidated Fund at the central treasury must be directed to the villages. To push wealth to the villages, we have two primary strategies. Mainly through rural development initiatives, the state must directly intervene. Specifically in the upcoming 2026 budget, we have allocated 35 billion rupees to rehabilitate 4,000 small irrigation tanks. We have allocated 25 billion rupees for Prajashakthi to engage rural communities in economic activities. Additionally, through the Road Development Authority alone, 24 billion rupees has been allocated for rural roads. In total, nearly 100 billion rupees has been directly targeted toward the rural population. Consequently, these development works enable them to participate in economic activities, and we are focusing heavily on this.
Thirdly, regarding our overall economic strategy, every country in the world has faced the challenge of rapid urban centralization—rural populations migrating heavily to urban areas. Fortunately, Sri Lanka did not suffer from that crisis in the same way. Even today, if a 4- or 5-day holiday comes up, Colombo empties out because people still reside in their native villages. How do we keep people in their villages while integrating them into our economic strategy? Two key elements are required: First, a rapid communication corridor between rural areas and cities. Information must flow rapidly, and people must have fast access to information to bridge the urban-rural divide. Second, a highly developed road network is essential to connect their goods and services between villages and cities. Hence, in the upcoming budget—specifically focusing heavily toward 2027—we are directing significant attention to keeping rural populations in their villages while bringing them into the new economic framework.
Therefore, we are focusing on a high-speed communication network and a road system linking villages and cities. Through a combination of such programs, we must address rural poverty. This is not something where a solution sought today yields results tomorrow. It requires a long-term, continuous plan pursued relentlessly. We believe we have laid the foundation for it.
Public investment, procurement, and public service reforms
Indeed. Thank you very much for that comprehensive answer. Mr. President, next we want to ask: while our revenue side is performing well with record collections, we observe a challenge regarding expenditure execution. Specifically, project approvals seem to take a considerable amount of time. Especially with large-scale projects... at the BOI as well, we were waiting to see if things would accelerate this year, but we haven't heard updates yet. How can we reduce project approval timelines? You mentioned earlier that BOI targets should grant approvals within 14 days, and other agency approvals within 90 days, given that some projects require clearance from 15 to 30 different agencies. I know this is a massive challenge—what steps are being taken in this regard?
Regarding public investments... we have planned a capital expenditure of 2 trillion rupees in the upcoming budget. Compared to historical figures in Sri Lanka, that represents a substantial increase. A capital investment of 2 trillion rupees is planned. Now the question that arises is whether the allocated funds will actually reach their intended targets. For instance, in 2023, only 64% of the capital expenditure allocated by the government was spent. In 2024, only 54% was spent. For 2025, we presented the budget in March, local government elections took place until May 6, and Cyclone Ditwah hit on November 28. Despite having a short operational window, we succeeded in utilizing 76% of our capital expenditure in 2025. [12]
Mr. President, was that along with the 500 billion rupees allocated for Ditwah?
The 500 billion for Ditwah was allocated for this year. But comparing 2025 overall, we managed to execute 76% of capital expenditure. However, if we want to move further ahead, several changes must happen. First, our entire procurement system was built around a national mindset that the state apparatus is perpetually prone to corruption, and therefore laws must be enacted to prevent corruption. Step by step, laws were enacted, and the ultimate outcome is that laws have become so rigid that nothing can get done. Because the focus was strictly on "corruption might happen here, fraud might happen there, how do we draft laws to block it?" In the end, it has reached a state where execution is paralyzed.
Laws have become rigid to that extent. Our traditional procurement system was designed merely for purchasing physical goods. But today, we don't just purchase goods. Take the tourism sector's promotional campaigns as an example. How do you purchase a promotional campaign under standard procurement rules? That's where things get stuck, and that's precisely where we face a bottleneck today. How do we resolve this issue? Similarly, in other areas, we are purchasing solutions—such as software systems. We tell vendors, "We have this problem; provide us a solution." But does our procurement code contain a mechanism to procure a solution? No, it is a system tailored strictly for purchasing physical goods. Therefore, our expectation is to identify these specialized domains and establish a new procurement system. How do you procure a software system? It requires a new procurement framework. Furthermore, if we are to remain competitive in the market...
We must operate competitively, especially entities like SriLankan Airlines. They operate in a competitive market, but how do they procure what they need? That requires a new procurement mechanism. Hence, we have identified several domains requiring new procurement systems. In matters of national security, how do we procure? For instance, we have a fleet of helicopters, but under current procurement rules, we cannot award maintenance and repair contracts in a timely manner. Funds are allocated in a given year, but within that year we fail to award the contract, and it rolls over to the next year. Thus, for such specialized fields, new procurement systems are essential, and we are actively addressing this. Additionally, previously after the budget was passed, the Treasury would disburse funds to ministry secretaries, and procurement procedures would only begin after formal budget approval.
As a result, most procurements were only finalized toward August or September. We have now altered that procedure. The Treasury Secretary now provides early assurance for major procurements that funds will be allocated in 2027. For example, take the Kurunegala–Galewela Expressway. Although funds were not allocated in 2026, we gave a formal guarantee to the Road Development Authority that funds will be provided in 2027. Consequently, they can immediately call for tenders and initiate contractor selection now. Tenders can then be awarded in January as soon as the budget passes in December. For several large-scale projects, the Treasury Secretary has already guaranteed funding allocations so ministries can initiate tender procedures in advance.
Next, we must transition to e-procurement. If all documents are submitted, evaluated, and verified online, we can significantly accelerate the process. On the other hand, our public service faces an intrinsic challenge: today, public service is no longer attractive. We face difficulties recruiting technical specialists into the public service. How do we recruit an IT expert? How do we recruit an engineer or a top-tier manager? Our existing salary scales are uncompetitive. Therefore, we must establish specialized pay scales for individuals with expert skills. Without doing so, we cannot attract high-level expertise. The state manages 2 trillion rupees in capital and delivers massive services in education and health, yet we cannot recruit skilled professionals under current salary bands. As a model, Dr. Hans intervened and performed a great service in establishing GovTech.
Through GovTech, we can recruit IT experts and domain specialists on specialized compensation packages. We must select several other domains as well. How can we attract a civil engineer on standard public sector pay scales? It's impossible. Previously, jobs were primarily created in the government. Today, the private sector creates far more jobs and offers superior compensation. Therefore, we face a major challenge in attracting technical professionals into public service. To overcome this, specialized pay scales must be granted to expert groups. Through such structural plans, we can eliminate the unattractiveness of public service. Only by adopting such a plan can we successfully execute nearly 80% of our capital expenditure.
That will take a little time, won't it, Mr. President?
Looking at this 2 trillion rupees, I believe that by the end of 2027, we will be able to execute a substantial portion of it.
Law reforms (SOE, PPP, Labour, Customs)
Mr. President, next I would like to pivot briefly toward legal reforms. Brief responses will suffice. Recently we discussed Customs law, Labor law, a Public-Private Partnership (PPP) law, and an Asset Management law. How quickly can we expect... the SOE law is...
The SOE law will come before the Cabinet in about two weeks, after which we can gazette it. The PPP law has been drafted in Parliament and referred to the Attorney General. Based on the Attorney General's recommendations, we can proceed. Regarding labor laws, our labor regulations are scattered across roughly 12 different statutes. A unified bill has been drafted, but it is undergoing further review, which will take some time. I won't say it can be done immediately; it will take time. Regarding the Customs Ordinance, after extensive discussions—I saw the Chamber submitted recommendations, and the Customs Department also presented views—we have reached a consensus after a long time. The most suitable proposal is to amend the Customs Ordinance. Those proposals have been sent to the Legal Draftsman, and they will present the bill shortly. Most of these laws will likely be passed in Parliament around January or February.
Tourism Industry and Promotional Campaigns
Good. Next, Mr. President, I'd like to touch on an industry topic... though you've partially answered it regarding tourism. We continuously emphasize the need for destination promotional campaigns in regional markets like India and China. Are you saying that due to procurement bottlenecks, available funds cannot be utilized for this purpose?
Yes, indeed—procurement of creative work. How do you procure a promotional campaign? Under our procurement code, you can procure a desk by specifying its height, width, weight, and density. But what is a promotional campaign? It's an abstract idea. How do you procure an idea? One might ask how it was done historically—and we understand how it was done then, right? But we cannot operate that way. How do we procure a promotional concept? Our procurement system needs to evolve to handle this. Who determines which concept is best? If an advertising firm presents a campaign plan, and another presents a different one, who measures them, and by what standard? That is why this promotional campaign has been delayed despite efforts over the past year and a half.
However, the Tourism Authority has informed us that tenders can be called in January. Additionally, the Authority conducted several small targeted campaigns across five key countries. Furthermore, tourism industry players submitted a proposal: if they bring a certain percentage of tourists beyond what they brought this year—say, if they brought 100 tourists this year and bring 120 next year, exceeding a benchmark growth rate—we are considering in the budget to offer a cash incentive per additional tourist. If they bring higher numbers of tourists, the Tourism Authority intends to disburse a dollar-denominated incentive per tourist brought. We are currently discussing this in budget preparations. This will motivate companies and institutions... We have proposed a scheme where the government grants a performance bonus for tourists brought above threshold targets.
Renewable energy, transmission networks, and battery systems
Excellent. Next, I would like to discuss renewable energy. Your government has moved very swiftly, particularly regarding the installation of battery energy storage systems. Mr. President, we believe rooftop solar and private sector participation are essential. In that context, can we expect revisions to the feed-in tariff payment mechanisms? And what is the strategy regarding grid upgrades? Some experts estimate it will cost 4 to 5 billion dollars to upgrade the grid.
Looking at our grid currently, from Kilinochchi to Habarana we have a high-tension transmission network. We plan to execute that transmission line through government funding supported by ADB assistance. However, we have identified several other transmission corridors—Puttalam, Wariyapola, Dambulla, Habarana, Veyangoda—which we plan to execute through private sector participation. Historically, all transmission networks in Sri Lanka were constructed by the government or the Ceylon Electricity Board (CEB). We intend to invite private investment for transmission networks. We have already selected four grid lines for this purpose, which will be tendered very shortly so the private sector can participate in our transmission infrastructure.
Regarding the broader energy sector, our policy rests on two pillars: first, energy stability and continuity; second, energy cost minimization. The feed-in tariff system is not a competitive tender system; it is a fixed tariff prescribed by the Public Utilities Commission of Sri Lanka (PUCSL). That system was used for a long time. However, from the standpoint of minimizing energy generation costs, fixed tariffs are suboptimal. Instead of paying a fixed rate, open competitive bidding yields much lower prices. To give an example: when we took office, there was a wind power project in Mannar where the agreed purchase price was 8.22 US cents per unit. We negotiated with the developer and stated we were willing to proceed if the price dropped below 5.0 US cents. They refused to go below 5 cents, so that agreement fell through. Subsequently, we floated a tender for 100 MW.
For the first 50 MW tender, we received bids at 3.96 US cents—dropping from 8.22 cents down to 3.96 cents. For the second 50 MW tender, we secured bids at 3.74 US cents. That is the power of open competition. Therefore, we are shifting away from feed-in tariffs toward competitive bidding to fulfill our generation capacity. When we discuss renewable energy, there is sometimes a misconception that our government is opposed to renewables. Yet when we assumed office, total installed solar capacity was 1,400 MW. Within this year alone, we added 1,500 MW of new solar, and contracted another 1,100 MW. By next year, an additional 2,600 MW of solar power will be generated under our administration. Furthermore, regarding solar land usage, Sri Lanka is a small island where 1 MW of ground-mounted solar requires roughly 3.5 acres. The question is whether a small country should commit vast land tracks to solar farms.
That led us to explore floating solar on reservoirs. For instance, we launched a 5 MW project at Ibbankatuwa. The total reservoir surface is 500 acres, and the 5 MW floating solar installation utilized just 5 acres—exactly 1% of the surface area. By covering only 1% of the reservoir, we generated 5 MW without occupying arable land. Hence, our primary focus is shifting toward floating solar. We have started projects at Randenigala, where both ownership and generation buildout will be tendered to the private sector. We have also identified Moragahakanda, Samanalawewa, and Chandrikawewa reservoirs for floating solar installations. We are firmly committed to renewables, but the technical challenge with electricity is that unlike other commodities, it must be consumed the exact instant it is generated.
All other goods can be stored, but electricity must be balanced instantaneously. Solar output peaks during daytime, creating excess day capacity. On certain days, grid operators had to curtail solar intake to prevent systemic grid failure. System management experts advised that excess daytime solar must be stored for evening peak hours. To address this, we issued a tender for 160 MW of Battery Energy Storage Systems (BESS). By November, 130 MW of battery storage will be completed, with the remaining 30 MW following shortly. A developer here today who won 130 MW is completing installation by November.
Furthermore, we tendered another 250 MW of BESS, which is currently under evaluation. I am pleased to share that preliminary evaluation figures indicate prices for this new 250 MW BESS tender are 10% lower than the previous 160 MW tender. Additionally, we plan to tender another 150 MW of battery storage specifically for existing solar power producers. We also recognize issues faced by rooftop solar owners. Currently, tax concessions apply to batteries above 1 MW, whereas sub-1 MW batteries face high import duties. This places small rooftop solar owners at a disadvantage. We are considering tax relief on batteries for sub-1 MW producers (such as 500 kW or 200 kW systems). The technical challenge is distinguishing solar storage batteries from general-purpose batteries for tax administration.
Once that technical distinction is resolved, we can implement the tax concession. Today, 69% of our total installed generation capacity is renewable. On many days, 70% to 75% of daily electricity generated comes from renewable sources. Over the last four consecutive days, not a single liter of diesel was burned for electricity generation—all diesel power plants remained shut down. Our transition to renewable energy is proving highly successful, yielding major gains toward continuous, affordable power supply.
Ports, logistics, and bunkering industry
Next, I would like to turn to the port and logistics sector. Our port is in a very strong position, handling around 10 million TEUs. By comparison, Singapore handles 39 million TEUs, meaning our volume is roughly a quarter of theirs. However, while Singapore's port-related industries contribute 18% to GDP, Sri Lanka's contribution is only 2% to 3%. The reason cited is the lack of ancillary value chains and port-centric industries. Are there plans for warehousing or ancillary facilities?
The port is the single most vital hub in our economic strategy. Currently, the Sri Lanka Ports Authority operates the East Container Terminal (ECT). At present, ECT handles only around 0.5 million TEUs annually. We do not believe a government alone should operate terminal facilities single-handedly. Therefore, while retaining state ownership of the East Container Terminal, we have decided to form an operating company and offer equity shares to private investors. ECT has a design capacity of 3.2 million TEUs, yet we currently handle only 0.5 million TEUs. Every passing day without full utilization means underutilizing a national asset. We are in active discussions with top global shipping lines, and we expect to onboard a premier international shipping line to manage ECT. Furthermore, regarding West Container Terminal Phase 2, we need to construct the breakwater.
It is a massive breakwater, but once built, West Terminal Phase 2 will add another 3.2 million TEUs of handling capacity. In the upcoming budget, alongside discussions with international financial institutions, we will allocate state funds for preliminary studies. An ADB feasibility study is underway, with an interim report expected by December and the final report by April next year. Thus, we will have the complete feasibility study for West Terminal Phase 2 development by April 2027.
Expanding terminal capacity is one goal; the second goal is transforming from simple transshipment into a comprehensive logistics hub. Regarding the logistics center, when we took office, tenders had been called, awarded, litigated, and entangled in legal disputes. We resolved all those disputes, agreed on compensation payouts to affected firms, and cleared the land. That prime port land will be re-tendered shortly to bring in a top-tier global logistics operator. To alleviate container congestion inside the port, feasibility studies for a 150-bay container yard at Kerawalapitiya have been completed successfully.
We are ready to tender the Kerawalapitiya container yard to the private sector. Regarding bunkering, current capacity is insufficient, so CPC and private operators have agreed to expand tank storage infrastructure. Concerning the 2.5% tax on bunkering, industry players have repeatedly requested relief. In the upcoming budget, we intend to provide tax concessions on bunkering. Bunkering operates within a global supply chain where local tax policies must align with international standards to maintain competitiveness. We will rectify tax distortions affecting bunkering competitiveness.
The technology sector
You mentioned Industry 4.0 and emerging fields like Big Data, AI, Quantum Computing, and Blockchain. Five years ago, our main constraint was a shortage of tech talent. Today, around 10,000 graduates pass out annually from public and private universities, but local job creation hasn't kept pace—a global trend, not just Sri Lanka's. How do we advance this tech sector?
The core issue is that our graduate workforce is concentrated at the middle skill layer, where job absorption bottlenecks occur. Moving up to AI and advanced layers opens vast employment opportunities. The public sector also requires substantial tech talent, and local private industries urgently need IT experts to digitize their operations. To bridge this skill gap, we are establishing a dedicated AI training center. Next week, we will submit a Cabinet paper to establish an AI Center in collaboration with Singapore. This center will provide advanced AI education, training, and practical research space for companies. Raising workforce capabilities to higher skill layers is key to resolving tech employment challenges, alongside expanding BPO remote work and international job access.
Meaning even degree curricula must evolve, Mr. President?
**President Anura Kumara Dissanayake:**Curricula must elevate to higher layers. While standard software engineering served initial needs, the global IT landscape has advanced rapidly. We must produce graduates equipped with higher-tier specialized skills. Shifting our IT sector up two or three maturity layers is the definitive solution.
Fuel subsidies and CPC vs private sector
Mr. President, turning to Middle East conflict impacts: we currently provide a diesel subsidy. Regional countries subsidize both petrol and diesel. How long can this continue? If the conflict lasts a year, do we maintain diesel subsidies for two years, or transition to targeted economic stimulus?
Our immediate priority when the Middle East war erupted was ensuring uninterrupted energy supply—fuel, electricity, and gas. Worldwide, supply disruptions triggered social crises. We successfully maintained continuous supply. While geopolitical conflicts are inherently unpredictable, ensuring energy continuity and stabilizing the domestic economy after Cyclone Ditwah was paramount to sustaining 1st quarter growth momentum. Had oil prices spiked unmitigated in Q2, our fragile economic recovery would have suffered a severe shock. That is why we provided targeted subsidy packages—spending 60 billion rupees over the first five months (providing a Rs. 100/liter diesel subsidy and Rs. 20/liter petrol subsidy).
When global prices briefly moderated in September, we paused the subsidy. However, as tensions escalated, we reinstated a Rs. 70/liter diesel subsidy for October, November, and December, costing 41 billion rupees. In fuel management, we adjust on a quarter-by-quarter basis.
While subsidies should ideally target vulnerable groups, data limitations currently prevent precise individual targeting (such as identifying specific agricultural tractors or small bread vendors). We are consulting telecom operators like Dialog and Mobitel to build data systems for targeted delivery going forward.
Regarding private fuel distributors: private entities were invited to foster market competition. However, when CPC generated 28 billion rupees in profit (targeting 30 billion rupees this year) and passed back savings to the public, private distributors restricted fuel deliveries rather than matching prices. CPC's diesel market share jumped from 58% to 77% as private stations curtailed supply. In rural areas serviced exclusively by private stations, this created artificial hardship. Similar behavior occurred with private gas companies while state gas entities maintained prices profitably.
A Rs. 5 or Rs. 10 price differential under fair competition is acceptable, but a Rs. 132/liter disparity on diesel is unviable. Therefore, we are strengthening CPC by opening 75 new CPC fuel stations in areas currently reliant solely on private distributors. Energy security cannot be compromised by private distribution lockouts. Private operators must act as fair, responsible market participants.
That aligns with your vision of inviting private enterprise into a fair, competitive market...
Precisely. We opened the market for competition, but private operators must combine profit motives with social responsibility.
Future imf programme
Final question before your closing message to the business community. We are entering the final phase of the 4-year IMF EFF program, with about six months remaining. Restructuring debt alongside the IMF brought significant stability. Given external risks like the Middle East war or Super El Niño, business leaders favor maintaining an IMF program anchor. What is your view on entering an 18th IMF program?
Our credit ratings have improved to B- Stable, but foreign reserves must build further to cushion external shocks. In 2024, annual fuel import costs were .472 billion; in 2025, fuel imports reached .482 billion in the first eight months alone, trending toward billion annually. The initial 4-year IMF EFF focused on achieving macroeconomic stabilization, which we have accomplished smoothly without policy friction. Now, our focus shifts from stabilization to accelerating growth. If a new agreement supports sustainable growth, we are open to it. There was virtually no conflict between our national economic vision and IMF reform targets, enabling us to complete the 4-year program successfully. We remain open-minded and will decide on an 18th program based on economic projections and shock-absorption needs over the next six months.
Final message
A very pragmatic perspective, Mr. President. Present today are foreign investors, diplomats, business leaders, Chamber members, and senior public officials. What is your closing message to them?
We have established transparency as our foundational rule. Secondly, essential laws protecting investments and businesses are in final legislative stages. Thirdly, we are expanding infrastructure across all key sectors. Our message is clear: the government will fulfill its responsibilities—ensuring transparency, enacting robust laws, and building modern infrastructure. We ask you to fulfill your role by investing confidently. When foreign investors partner with Sri Lanka, they seek strong, credible local enterprise partners. We are committed to fostering a thriving domestic business class. Budget policies will offer targeted land and utility concessions for regional investments in ports, renewables, Port City, and tourism. Invest without hesitation—we guarantee policy stability, protection, and trust. Thank you.
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