ECONOMYNEXT — Sri Lanka ran a rare budget surplus in the first half of 2026 as strong tax collections coincided with sharp delays in state spending, including emergency rebuilding funds, the World Bank said in its latest Sri Lanka Development Update October 2026, titled “From Recovery to Transformation”.

By mid-year, the government had disbursed only about 8 percent of the 500 billion rupees allocated for reconstruction after Cyclone Ditwah.

Execution was slow across the board, with only 16.7 percent of the full-year capital budget spent, while less than half of a 100 billion rupee relief package linked to the Middle East war had been paid out.

“This under-execution reflects weaknesses in public investment management, including project selection, procurement, and implementation capacity — rather than financing constraints,” the report said.

In contrast, state revenues showed strong growth. Total revenue rose 27.2 percent year-on-year, with tax collections climbing 25.9 percent, mainly driven by Value Added Tax (VAT) and duties on vehicle imports following the lifting of import curbs.

With overall spending expanding just 7.9 percent, the government recorded a primary surplus of 1,233.1 billion rupees and an overall budget surplus of 9.5 billion rupees, compared with a 406 billion rupee deficit during the same period last year.

Revenues were further supported by new tax laws certified in June, which raised capital gains taxes, introduced VAT on foreign digital service providers, and increased VAT on financial services. The state is also piloting a national e-invoicing system.

Heavy interest costs continue to weigh on public finances, consuming around 46 percent of government revenue in 2025, though this has eased from nearly 80 percent at its peak between 2022 and 2023. The World Bank expects this share to fall to about 34 percent by 2028.

However, with government primary spending legally capped at 13 percent of gross domestic product (GDP), the World Bank warned that the administration must focus on spending efficiency.

“This spending ceiling increases the importance of improving spending quality rather than simply increasing spending levels,” it said. (Colombo/Oct6/2026)

ECONOMYNEXT – Sri Lanka and Thailand have agreed to enter into a mutual visa exemption agreement for ordinary passport holders, minister Nalinda Jayatissa said.

Cabinet has approved a proposal to sign the agreement between Sri Lanka and Thailand.

“Both parties have agreed to enter into an agreement on visa exemption for holders of ordinary passports, with the aim of further strengthening the friendly relations between Sri Lanka and Thailand and facilitating travel for their citizens,” Jayatissa said.

The waiver applies strictly to tourism and excludes categories that require prior official clearance, such as employment, studies, and media work.

“Under this agreement, citizens of both countries holding valid ordinary passports will be permitted to enter, exit, and transit without a prior visa for general tourism purposes — excluding employment, education, media activities, or other activities requiring prior approval.”

Under the terms, visitors can stay for a maximum single duration of 30 days and an aggregate stay of up to 90 days within a 180-day window.

Responding to questions on whether ordinary passport holders will be able to enter Thailand under the same terms, Jayatissa confirmed the reciprocal nature of the plan:

“To make travel convenient for ordinary citizens — for ordinary citizens of both countries, Thailand and Sri Lanka — approval is being obtained to issue these free visas for a 180-day period,” Jayatissa said.

He added that both countries have reached an agreement allowing travelers to enter, exit, and transit without requiring a prior visa permit for general tourism.

In 2024, Thailand exempted visa for Sri Lanka passport holders for up to 60 days for the purposes of tourism, business engagements, urgent work or ad-hoc-work.

Thailand later limited the stay period to 30 days, and last month removed Sri Lanka from Thailand’s 60-day visa exemption scheme effective September 15.

Sri Lanka provides Thais a 30 day visa free single entry, after they obtain an Electronic Travel Authorization (ETA) online.

Visa exemption could increase tourism and investor interest however, this could potentially attract criminals and illegal businesses into a country unless proper protocols are put in place. (Colombo/Oct6/2026)

ECONOMYNEXT – Sri Lanka has awarded contracts valued at over 4 billion rupees for several road infrastructure improvement projects, minister Nalinda Jayatissa said.

Bids were called from contractors, and following evaluation of the bids, the Cabinet approved the proposals to award contracts as follows:

– Asset Engineering (Pvt) Ltd was awarded a 744.68 million rupee contract to improve the Blackpool-Ambewela-Pattipola-Horton Plains Road (12+500km to 18+000km) (B512).

– Nagma Engineering (Pvt) Ltd was awarded a 645.69 million rupee contract to improve the GomburuOya-Balapokuna Road (0+000km to km 8+500 (excluding sections from 5+250km to 5+450km and 6+900 to BD 7+150).

– K D A Weerasinghe & Co (Pvt) Ltd was awarded a 711.93 million rupee contract to improve the Lady McCallum Drive (0+000km to 2+700km) (B249).

– Senerath Engineering (Pvt) Ltd was awarded a 1,291.80 million rupee contract to improve the Palapathwala-Galewela Road (19+000km to 27+000km) (B346).

– Komuthi Engineering Services (Pvt) Ltd was awarded a 666.62 million rupee contract to improve the Kadawatha-Ragama-Welisara Road (3+000km to 8+050km) (3168). (Colombo/Oct6/2026)

ECONOMYNEXT – Sri Lanka’s cabinet of ministers have approved a proposal to award Master Hellie’s Engineering Consultants a 91.21 million rupees (excluding VAT) contract, comprising 52.44 million rupees (excluding VAT) and a foreign component of 122,859 dollars, to conduct a feasibility study to reduce traffic congestion in Colombo.

The feasibility study is to reduce traffic congestion in areas around Lotus Junction, Port Access Expressway and Marine Drive, minister Nalinda Jayatissa said.

The Road Development Authority invited expressions of interest from consultancy firms, and invited proposals from a shortlist of 5 firms.

“Cabinet approved the proposal to award the consultancy service contract for a sum of Rs. 91.21 million (excluding VAT) comprising a value of Rs. 52.44 million (excluding VAT) and a foreign component of US$ 122,859 to M/s Master Hellie’s Engineering Consultants (Pvt) Ltd.” (Colombo/Oct6/2026)

ECONOMYNEXT — Sri Lanka’s economy has reached pre-crisis levels, with real gross domestic product (GDP) projected to grow by 4.4 percent this year, exceeding earlier forecasts, but the recovery remains uneven and incomplete, the World Bank has said.

Growth is driven by strong industrial performance and steady service sector activity, the multilateral lender said in its latest Sri Lanka Development Update October 2026, titled “From Recovery to Transformation”.

Real GDP expanded by 4.7 percent in the first half of 2026 following twelve consecutive quarters of growth, returning output to 2018 levels. The primary budget surplus also rose sharply.

However, the recovery remains uneven and incomplete, as household incomes and employment continue to lag. Poverty remains high at 16.9 percent, and inflation has picked up in recent months due to higher food and energy prices.

“Reaching this milestone marks a beginning, not the end — the country needs to seize this momentum to transform its economy and create jobs,” said Gevorg Sargsyan, World Bank Group Country Manager for Sri Lanka.

Growth is projected to slow to 4.2 percent in 2027 as the initial post-crisis rebound fades and productivity remains weak.

The report warned of key downside risks, including global energy market volatility and the impact of El Niño on food security.

To move from recovery to transformation, the bank emphasized shifting growth drivers away from state spending toward private investment and exports, highlighting agribusiness as a key sector that accounts for over 40 percent of jobs and nearly 30 percent of goods exports.

“Sri Lanka can capitalize on sectors with immense potential such as agrifood, investing in the policies, infrastructure, and enabling environment that allow farmers, businesses, and investors to drive the next phase of growth,” Sargsyan said.

The World Bank called for trade policy reforms, predictable regulations, and redirecting subsidies into productivity-enhancing agricultural research and climate-smart technologies. (Colombo/Oct6/2026)

ECONOMYNEXT – Sri Lanka lender Sampath Bank has enabled businesses to accept Google Pay over its Internet Payment Gateway (IPG), powered by Bancstac.

Participating merchants can now offer Google Pay across e-commerce platforms, mobile apps, and digital invoices.

This provides customers with a secure and frictionless biometric checkout experience using Android devices.

When a customer selects Google Pay on a merchant’s payment page, the IPG facilitates a secure transaction using tokenization, ensuring that sensitive card details are never exposed or shared, Sampath Bank said.

Cardholders are authenticated via robust security protocols, including biometric verification and device passcodes.

Upon verification, the transaction is processed in real-time by Bancstac, and financial reconciliation is handled automatically within the standard Sampath Bank settlement process.

“We are proud to extend our strategic partnership with Bancstac to deliver Google Pay capabilities to our extensive merchant base. This solution provides our business partners with an effortless tool to grow their business to more customers and countries whilst offering the convenience and security of Google Pay,” Chirath Samarasekara, Head of Card Centre, Sampath Bank, said.

“By enabling Google Pay, we have eliminated technical barriers for merchants wishing to accept one of the most widely used digital wallets globally. This payment innovation gives Sampath Bank merchants the tools to help increase sales conversions, reduce cart abandonment and enhance the digital payment experience for their customers,” Evan Lau, CEO of Bancstac, said. (Colombo/Oct6/2026)