By: Staff Writer
October 29, Colombo (LNW): Sri Lanka’s promise to transform its capital market is approaching a decisive moment, with the 2027 Budget expected to unveil a stronger policy commitment. Yet behind the assurances lies a deeper challenge: can the Government dismantle the structural weaknesses that have discouraged investors, delayed public investment and undermined confidence in the country’s financial institutions?
Deputy Minister of Finance and Planning Dr. Anil Jayantha Fernando has conceded that the Government’s capital market initiatives over the past two years were not sufficiently visible. His pledge to give the sector greater prominence in the November 12 Budget raises an important question: will the next phase deliver meaningful reform, or merely package existing commitments into a more impressive policy announcement?
The Finance Ministry has reportedly discussed and accepted most of the 12 proposals submitted by the Securities and Exchange Commission of Sri Lanka (SEC). However, acceptance is not implementation. Investors will need clear deadlines, measurable targets, regulatory accountability and evidence that the proposals can improve access to capital and strengthen market integrity.
The Deputy Minister’s own assessment identifies one of the central weaknesses in Sri Lanka’s economic recovery. Although macroeconomic stabilisation targets have largely been achieved, the country must now generate investment capable of supporting sustained growth. Domestic savings, he argued, offer an immediate opportunity to bridge the gap between savings and investment.
But mobilising savings requires more than encouraging people to purchase shares. Investors must be confident that company disclosures are reliable, prices reflect fundamentals and enforcement agencies can act against manipulation. Dr. Fernando acknowledged that information asymmetry, including unequal access to material information, has contributed to negative perceptions of the market.
Such concerns demand stronger surveillance, timely disclosures, credible investigations and consistent penalties. Without visible enforcement, ordinary savers may remain reluctant to expose their money to market risks, while businesses continue to face difficulties raising long-term finance.
The Government’s proposed Rs. 2 trillion capital expenditure programme presents another test of credibility. Investment in transport, rural connectivity, railways and logistics could improve productivity and strengthen the business environment. However, Dr. Fernando admitted that bureaucratic systems and resource limitations were restricting the pace of public spending.
The critical issue is whether the Treasury can convert budgetary allocations into completed projects. Delays weaken economic returns, postpone employment opportunities and reduce the potential benefits of public investment. Better monitoring and transparent reporting of expenditure will be essential.
Taxation also remains unresolved. Government revenue reportedly exceeded 16% of GDP at the end of 2025, while the original target was 15.4% by 2030. Nevertheless, businesses and individuals awaiting relief from corporate, personal and indirect taxation have been told that substantial changes must wait until revenue mobilisation is secured.
That caution reflects fiscal realities, but prolonged uncertainty over tax policy can complicate investment decisions. The Government must demonstrate that additional revenue will support productive spending and that eventual tax reforms will distribute the burden fairly.
Meanwhile, the proposed restructuring of State-owned enterprises could reshape the relationship between government and business. Some entities may be merged or diversified, while selected utilities could remain under State control to prevent market manipulation. The planned SOE Act must establish transparent governance and prevent restructuring from becoming an avenue for preferential treatment.
External risks, including Middle East instability, global trade tensions and climate-related disruptions, further complicate the outlook.
Ultimately, Budget 2027 must be judged by outcomes rather than rhetoric. Investors need functioning institutions, predictable rules and protection against unfair practices. Without these foundations, the promised capital market revival could remain a policy ambition rather than a credible engine of national economic transformation.
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