By:Staff Writer
January 22, Colombo (LNW): Sri Lanka’s Parliament took a pivotal step this month by endorsing the Colombo Port City Economic Commission (Amendment) Act, No. 01 of 2026, signaling fresh legislative momentum to tighten oversight over offshore banking and strengthen tax compliance within the Colombo Port City Special Economic Zone.
Speaker Dr. Jagath Wickramaratne confirmed the certificate endorsement on January 21, ending weeks of political debate on the amendment bill originally introduced on December 2, 2025, and passed on January 1, 2026. The revised legal framework grants the Central Bank of Sri Lanka (CBSL) enhanced regulatory authority over offshore banking, aligning the Port City with global financial standards and ostensibly scaffolding investor confidence under internationally accepted norms.
The amendment arrives at a delicate juncture for Sri Lanka’s economy. According to multiple international institutions, the island nation has been navigating a recovery from the deep crisis of 2022, recording notable GDP growth including a 5.4% expansion in Q3 2025 and showing resilience across manufacturing and services sectors.
However projections for 2026 show moderating growth, with Standard Chartered forecasting roughly 3.5% GDP expansion compared with stronger performance in 2025 a reminder that structural reforms must be sustained. The IMF’s Extended Fund Facility data also highlights that Sri Lanka’s growth will continue at a modest pace, inflation will remain in check, and national savings will stabilise but risks stemming from fiscal constraints and external demand shocks persist.
Economic experts have been vocal about the Port City’s potential and pitfalls. “Regulatory clarity and strong oversight are key if the Port City is to attract high-quality foreign direct investment rather than merely serving as a tax haven.”
He stresses that oversight alone is insufficient without broader reforms in transparency and corporate governance.
MP Harsha de Silva defended the amendment:“Enhancing the Central Bank’s supervisory powers ensures fiscal discipline and protects our financial system’s integrity essential for expanding Sri Lanka’s role as a global financial hub.”
Officials say that these changes aim to bridge gaps in tax compliance, clarify criteria for “Businesses of Strategic Importance,” and signal to investors that Sri Lanka is committed to global norms rather than unfettered tax giveaways.
However, prior attempts at lax tax incentives drew IMF warnings, which recommended targeted business environment improvements not blanket tax holidays to ensure long-term fiscal sustainability.
With foreign exchange reserves climbing toward projected year-end levels around USD 7 billion and inflation kept under control, Sri Lanka’s macroeconomic backdrop has strengthened, but only moderately. Analysts note that developing Port City into a legitimate financial core could help diversify the economy beyond tourism, remittances and agriculture, potentially boosting exports of services and financial products.
Still, much will depend on how Singapore, Dubai, and other regional financial centers react, and whether Sri Lanka can actually convert legislative reforms into meaningful capital flows and jobs. As one senior economist put it“Legislation is step one; execution, credibility, and sustained policy consistency are everything.”
