By: Staff Writer
November 27, Colombo (LNW): The Sri Lankan government has positioned Artificial Intelligence (AI) as a cornerstone of its economic transformation, but the financial backing in the Budget 2026 appears inadequate to realize these ambitions, according to several IT experts and industry leaders.
With only Rs. 3 billion earmarked for AI development, national data platforms, and government-managed data centres, analysts warn that the country risks missing another critical technological opportunity. A leading AI researcher described the allocation as “deeply unrealistic,” noting that even feasibility studies would consume a large portion of the funds. Industry benchmarks indicate that a single mid-scale data centre typically requires Rs. 20-40 billion, far outstripping the total budget allocation.
Beyond the central AI fund, the government has proposed Rs. 500 million in incentives for international data-centre investors, including subsidized land, reduced initial electricity rates, and green-energy support. Another Rs. 750 million is slated for AI and cloud innovation, research centres, and scholarships. Plans to streamline approvals for digital towers, offer tax exemptions, and establish Virtual Special Economic Zones aim to attract export-oriented tech enterprises.
Despite these initiatives, industry leaders argue they remain far below global standards. “Sri Lanka lacks large-scale data centres, national AI cloud infrastructure, and high-performance computing capabilities. Until these gaps are addressed, AI goals risk being political slogans rather than economic strategy,” warned the CEO of a leading tech company. Even within government circles, there is quiet acknowledgment of the problem. A senior Finance Ministry official, speaking on condition of anonymity, said: “The allocation will not build infrastructure; it will only support planning. AI sells politically, but practically, the budget falls short.”
Regulatory progress has been notable, however. The Personal Data Protection Amendment Act No. 22 of 2025 provides legal clarity essential for attracting hyper-scale data centre investors. Additionally, the upcoming Digital Economy Act, the creation of a Digital Economy Authority, and a Cabinet-level Digital Economy Council promise a unified approach to digital governance for the first time.
Sri Lanka’s geographic location is another strategic advantage. With the landing of the SEA-ME-WE 6 submarine cable and robust regional connectivity through BBG, SMW4, MSC, and Bharat-Lanka cables, the island could serve as a low-latency data and disaster-recovery hub for India, Southeast Asia, and Europe. Yet, industry experts caution that this potential is contingent on modern infrastructure, reliable renewable energy, and a skilled workforce.
History suggests that the country has repeatedly missed technological waves due to underinvestment and policy inconsistencies. As one industry leader noted, “If we fail now, Sri Lanka will spend the next decade importing AI while the rest of Asia develops it.” Experts urge urgent investment, talent development, and a commitment to treating AI as a national economic priority, warning that the 2026 AI push could join a long list of missed opportunities without decisive action.
