Emerging from one of the worst economic crises in its history, Sri Lanka is fast-tracking the push to attract foreign direct investment (FDI), fueled by far-reaching reforms under the newly passed Economic Transformation Act (ETA).

The ETA, today’s most important investment law in the country, seeks to overhaul obsolete systems, streamline approval processes, and provide a more investor-friendly environment.

The law’s key provisions are the replacement of current investment regulations, setting up new institutional frameworks, and enhanced transparency and efficiency in approvals.

According to a senior Finance Ministry official, one of the act’s primary goals is to slash the average time required to green-light investments  from a staggering 269 days to just 82.

A significant focus is also being placed on Public-Private Partnerships (PPPs), with the government planning to introduce a separate Investment Management Act.

This would offer incentives like the Accelerated Depreciation Allowance (ADA) to attract private sector interest in public infrastructure projects.

Foreign direct investment (FDI) inflows to Sri Lanka reached $ 783 million as of 15 September, according to Board of Investment (BOI) Chairman Arjuna Herath.

“We are on track to cross the $ 1 billion FDI mark for 2025. The last time Sri Lanka achieved a billion dollars in FDI was in 2022,” Herath said.

While construction and telecom projects dominated in 2022, this year’s inflows have been more diversified. “We have a good mix with investments in ports, solid tyre manufacturing and the hospitality sector,” he noted.

Some of the inflows in 2022 were from projects that had Strategic Development Project Act concessions, which are no longer available.

In the twelve months to mid-September, the BOI approved 134 projects with a combined value of $ 1.3 billion.

“Investor appetite is improving because they see Sri Lanka has come a long way since the 2022 economic crisis,” Herath said.

Commenting on Sinopec’s proposal to develop a $ 3.5 billion refinery in Sri Lanka, Herath said the project had stalled over the issue of granting the company greater market access. Negotiations are still underway.

“Both sides are committed to reaching an agreement, and we believe a decision will be reached shortly,” he said, while declining to speculate on whether consensus could be achieved.

But even with all these protective measures, there are still problems. Eminent Professor Wijitapure Wimalaratana Thera, Chairman of Sri Lanka Economic Association, cautioned that geopolitical instability say, the war between Iran and Israel has a tendency to drive investors into safer assets like gold or U.S. Treasury bonds and divert capital away from emerging economies like Sri Lanka

As per finance experts, the difference in FDI data of finance ministry, BOI and othe relevant state agencies such as the ministry of industries most probably arises from using different methodologies: one could be total committed investments approved projects that have not been disbursed yet while the other is realised inflows, i.e., actual cash that has flowed into the economy.

Such numbers need to be clarified, economists say, for transparency and investor confidence. With Sri Lanka seeking $2 billion in FDI this year and looking to receive $4 billion from the tourism industry, consistency in the presentation of official numbers will be key to figuring out the reliable economic turnarounds.

Sri Lanka’s tea industry is enjoying one of its strongest export performances in over a decade, yet beneath the surface, structural weaknesses and policy uncertainty threaten to blunt its momentum.

Customs data analysed by Asia Siyaka Research shows that in the first eight months of 2025, tea exports rose to 174.5 million kilograms, a 7 percent increase compared to the same period in 2024.

Export earnings climbed to Rs. 306 billion (around US$1.2 billion), up from Rs. 288 billion (US$942 million) a year earlier.

This makes the January–August 2025 dollar earnings the highest since 2014, despite total export volumes that year being significantly higher. The free-on-board value per kilogram reached US$5.88, edging past last year’s US$5.80 and well above the 2014 average of US$5.09.

A closer look at the export structure reveals an ongoing shift toward value-added products. Bulk tea accounted for 42 percent of shipments, while packeted tea rose to 45 percent, up from 40 percent a year earlier.

 Exports of tea bags remained stable at 10 percent, but volumes increased marginally. High-value categories such as instant tea grew steadily, lifting the overall share of value-added tea exports to 58 percent, compared to 53 percent in 2024.

The global market map for Sri Lankan tea is also shifting. Iraq retained its position as the largest importer with 26 million kilograms, or 15 percent of all shipments, while Russia remained in second place though volumes slipped slightly.

The standout destination this year has been Libya, where exports surged 198 percent to 14.3 million kilograms. Other major destinations included the UAE, Turkey, Iran, Chile, China, Azerbaijan and Saudi Arabia.

Yet industry leaders caution against mistaking this export surge for long-term stability. Producers are under intense pressure from soaring costs.

 A government-mandated 70 percent wage hike has raised estate workers’ daily wages to Rs. 1,700, a move that producers warn could increase overall costs by nearly half, undermining competitiveness in global markets.

Fertilizer and fuel costs, coupled with high inflation, have further squeezed margins, leaving both corporate plantations and smallholders vulnerable.

The sector is also grappling with the legacy of erratic government policies. The fertilizer ban imposed in 2021, though later reversed, left lasting damage to yields and confidence.

More recently, planters complain of inconsistent decisions on subsidies, taxation, and mechanization support, with state-owned plantations remaining significantly less productive than their private counterparts.

Climate change has compounded the challenge, with erratic rainfall and prolonged droughts hitting yields and quality. Meanwhile, labor conditions remain under scrutiny.

 Academic studies have flagged risks of labor exploitation and weak protections in certain plantations, raising ethical concerns that could jeopardize Sri Lanka’s access to premium international markets.

The government of President Anura Kumara Dissanayake has pledged large-scale support for the industry, including a Rs. 312 billion package aimed at clearing debts and upgrading quality.

While this marks a significant commitment, details of how the funds will be deployed remain vague. More broadly, critics argue that the administration’s tea policy remains reactive, guided by short-term political considerations rather than long-term restructuring.

 For now, Sri Lanka’s tea sector stands at a delicate crossroads. The export surge of 2025 provides much-needed revenue and a boost to national morale, but it risks masking the deep fissures in the industry.

Without coherent reforms, sustained investment in technology, and careful balancing of wage demands with global competitiveness, the sector’s current success may prove fleeting. The Ceylon Tea brand may still carry prestige abroad, but at home, the foundations of the industry remain perilously fragile.

When the NPP government moved to lift the vehicle import ban early in 2025, it bet heavily on recapturing lost tax revenues. But the timing could not be worse: Sri Lanka is scrambling to shore up foreign exchange inflows and rebuild its dwindling foreign reserves. The question now: did the state trade away scarce dollars just to boost rupee-tax collections and at what longer-term cost?

As of 16 September, Sri Lankan commercial banks had opened about USD 1,570 million in Letters of Credit (LCs) for vehicle imports. According to Finance Ministry disclosures before the Committee on Public Finance, this is the magnitude of foreign exchange commitment tied to the import liberalisation. (User’s assertion)

Official testimony further indicates the government expects tax revenue from vehicle imports to reach Rs. 460 billion in 2025, but ministry officials now privately suggest that figure may exceed Rs. 700 billion by year end.

On paper, that sounds like a revenue success. But the caveat is stark: opening LCs for nearly USD 1.57 billion implicitly drains the dollar reserves money that could otherwise shore up the external buffer or service critical imports.

The finance ministry’s claim that rupee collections offset a “loss” of dollars is disingenuous: the government has effectively swapped liquidity in foreign currency for rupee revenue a zero-sum game at a perilous moment.

Public data already hints at the pressure. From January to May 2025, vehicle imports accounted for USD 312 million out of total merchandise imports of USD 1,507 million.

Meanwhile, Central Bank data shows that Sri Lanka is running a widening trade deficit, even as remittances and services exports attempt to cushion the external position.

Blooming import demand is already drawing alarm: Treasury sources indicate that LCs worth USD 742 million had been opened at one point during the year.

Additionally, independent commentary warns of trade-off risks from rising vehicle import pressures.

Central Bank projections also point to total vehicle import flows climbing to about USD 1.5 billion by end-2025.

Contrast that with last year’s constraints: during the import restrictions, the tax intake from vehicle imports dried up, but the FX outflow was curbed.  The state accepted shortfalls in revenue in exchange for retaining precious dollars. Now it has reversed that trade.

What is glaringly missing from public records is a transparent cost–benefit breakdown:

How many dollars were actually drained from reserves to satisfy these LCs?

What is the net foreign reserve position today, compared with the same point last year?

How much incremental rupee revenue is “net gain” versus what would already have been collected via other taxes or suppressed domestic demand?

The government’s posture that rupee tax gains outweigh the “lost” dollars — masks a precarious assumption: that future foreign inflows (via exports, remittances, tourism) will more than replenish the reserves. This is a gamble. For now, Sri Lanka is running with a thinning external cushion.

The NPP’s vehicle import liberalisation may have succeeded in swelling coffers in rupee terms, but it has also exposed the country to foreign exchange stress at a moment of external fragility.

An independent forensic inquiry is needed to compare month-by-month FX reserve movements, vehicle import outflows, and incremental tax gains including cross-checks against prior year performance to assess whether the tradeoff was economically justified or merely a fiscal sleight-of-hand at the expense of external stability.

Prime Minister Dr. Harini Amarasuriya has stressed the need for international cooperation to combat illegal activities in the Indian Ocean, including drug trafficking, illegal migration, and piracy, while highlighting Sri Lanka’s role in ensuring maritime security.

She made these remarks at the Twelfth International Maritime Conference – Galle Dialogue 2025, held under the theme “Maritime Outlook of the Indian Ocean under Changing Dynamics” at the Navy Wave and Lake Banquet Hall in Welisara.

“The Indian Ocean is one of the most strategic maritime regions in the world. It is both a stage for competition and a platform for cooperation. Sri Lanka’s aim is to work with all partners to make the Indian Ocean a region that is peaceful, secure, sustainable, and governed on the basis of justice and cooperation,” the Prime Minister said.

Dr. Amarasuriya emphasized that climate change, rising sea levels, overfishing, and pollution threaten biodiversity, human security, and economic stability, underscoring the importance of marine conservation and effective maritime governance.

On combating drug trafficking, she noted:

“This is an important responsibility of our Navy and Coast Guard. The Government is committed to safeguarding national security and public health, and preventive measures are already being implemented.”

The Prime Minister further announced that the Government has allocated Rs. 92.5 billion to the Navy in the 2025 Defence Budget, a 12% increase from the previous year, describing it as a clear commitment to strengthening maritime security.

She praised the Navy’s dedication in regular patrols, intelligence-based operations, and narcotics seizures, but stressed that no nation can tackle these challenges alone.

“Freedom of navigation, maritime security, and responses to piracy and trafficking all depend on coordination and trust-building between navies and coast guards. Sri Lanka calls upon all stakeholders to contribute to a cooperative security framework founded on transparency and respect for international law,” she added.

The event was attended by Defence Deputy Minister Major General Aruna Jayasekara, Admiral of the Fleet Wasantha Karannagoda, Defence Secretary AVM Sampath Thuyacontha, Indian Navy Chief Admiral Dinesh K. Tripathi, as well as the commanders of the Army, Navy, and Air Force, along with senior Tri-Forces officials.

Sri Lanka’s latest national animal census, conducted on March 15, 2025, has revealed that the country is home to 5.19 million Toque monkeys, Agriculture and Livestock Deputy Minister Namal Karunarathne told Parliament.

The census also recorded:

• 1.75 million Langur monkeys
• 4.28 million Peacocks
• 2.67 million Giant Squirrels

Dismissing claims that the project cost exceeded Rs. 70 million, the Deputy Minister clarified that the actual expenditure was only Rs. 3.916 million.

Responding to a question from MP Rohitha Abeygunawardhana, he said the survey was undertaken to develop a scientific policy response to crop damage caused by wild animals, noting that this was the first such census of crop-damaging species in the country.

He added that the findings have already been used to map animal populations by district, highlighting the highest concentrations of the four species. These maps, he said, will help authorities design strategies to minimize crop lossesand formulate evidence-based recommendations for mitigating the impact of these animals on agriculture.