President Anura Kumara Dissanyake is to unveil its 2026 Budget today under the theme of “achieving a Productive Economy and fostering the engagement of everyone in economic development.”

Yet behind this aspirational message lies the reality of a tight fiscal program, rising debt obligations, and the demands of the IMF programme, all of which point to higher taxes and the possible introduction of new levies, and a reformed capital gains tax regime.

The Appropriation Bill, approved by the Cabinet in advance this week will be gazetted shortly in September 20, with second reading and Budget Speech following early in November.

Treasury Secretary Dr. Harshana Suriyapperuma has instructed ministries and provincial councils to bring forward their estimates within a stringently contained fiscal framework, prioritising settling arrears, restarting suspended infrastructure development projects, improving public transport, and furthering digitalisation.

While these priorities suggest a development agenda, they also require an accelerating surge in government income, and that can only be brought about through more tax reform.

IMF reviews of Sri Lanka’s fiscal framework have repeatedly stressed the need to broaden the tax base, remove exemptions, and shift the system toward direct taxation.

In this context, several new measures are being prepared for 2026. Chief among them is the introduction of reformed capital gains tax regime, designed to capture contributions from high net worth individuals and help rebalance a tax structure long skewed toward indirect levies.

Proposals to tax imputed rental income on owner occupied and vacant properties are also expected to resurface, while exemptions for some export oriented service industries may be curtailed.

At the same time, the government is moving to expand VAT coverage, particularly on digital services provided by non resident firms, a measure already announced for April 2026.

Sectors such as liquor, tobacco, and gaming may also face higher corporate tax rates in line with IMF guidance to increase progressive taxation.

To meet fiscal targets under the IMF programme, Sri Lanka must lift its tax to GDP ratio toward 14-15 percent by 2025-2026.

This implies a revenue requirement of between Rs. 5,500 and Rs. 6,000 billion in 2026, with total receipts, including non-tax income, projected at around Rs. 6,500 billion.

The r expenditure ceiling for next year is set at Rs 4,385.4 billion (4.38 trillion), according to the Treasury provisional data and mathematical models. .

Despite the policy emphasis on improving the balance between direct and indirect taxes, the latter will still account for the lion’s share of state income.

 The 2026 Budget may narrow this gap slightly through wealth and property taxes, but the system will remain dominated by indirect levies that disproportionately burden ordinary households.

The risks of taking this path are clear. Expanding indirect taxes can fuel consumer prices and stir inflationary pressures, and politically sensitive measures like a wealth tax will test the government’s ability to make it stick as well as blunt the opposition from vested groups.

 Budget 2026, therefore, is shaping up to be more than a spending budget. It will be an important litmus test of Sri Lanka’s capacity to overhaul its tax structure, harmonise equity with fiscal necessity, and give the revenue base it needs to stabilise the economy.

If it succeeds, it can begin to shift the burden onto those who are best able to bear it. But if it fails, the country may be embarking on another cycle of revenue deficiencies, borrowing, and austerity.

The European Union (EU) and Germany reaffirmed their commitment to promoting unity and reconciliation in Sri Lanka, as the Strengthening Social Cohesion and Peace in Sri Lanka (SCOPE) programme officially concluded following three-and-a-half years of impactful work across the country.

Speaking at the closing ceremony held recently at the Galle Face Hotel, EU Ambassador to Sri Lanka and the Maldives Carmen Moreno said that the SCOPE programme has “helped build bridges between institutions, communities, and individuals,” highlighting the importance of the initiative in fostering trust and dialogue.

“The European Union is proud to have supported this effort to strengthen social cohesion. As Sri Lanka continues this journey, the lessons and partnerships forged through SCOPE will remain a lasting contribution,” Ambassador Moreno stated.

German Ambassador to Sri Lanka and the Maldives Dr. Felix Neumann echoed these sentiments, emphasizing Germany’s commitment to reconciliation and open dialogue.

“SCOPE has shown how honest reflection and cooperation can build the foundations for lasting social cohesion. We are proud to have supported a programme that strengthened institutions and empowered communities to move forward together,” he said.

Launched in March 2022, SCOPE was co-funded by the European Union and the German Federal Foreign Office, and implemented by GIZ in partnership with the Ministry of Justice and National Integration. Over its three-and-a-half-year implementation period, the programme worked with over 50 government and civil society partners, engaging more than 175,000 people across all 25 districts of Sri Lanka.

The initiative aimed to enhance institutional and community capacities, promote inclusive public discourse, and support economic inclusion to strengthen peace and social cohesion nationwide.

The closing event brought together government officials, diplomats, civil society leaders, academics, media professionals, and private sector representatives to celebrate SCOPE’s achievements and discuss ways to sustain its outcomes in the years ahead.

Distinguished attendees included Deputy Minister of Religious and Cultural Affairs Muneer Mulaffer, EU Ambassador Carmen Moreno, and German Ambassador Dr. Felix Neumann.

The programme featured a presentation on SCOPE’s impact and outcomes, a panel discussion with civil society representatives exploring key learnings, and the launch of a photo stories book capturing personal narratives and community experiences from across the island.

The event concluded with an art performance by the Temple of Fine Arts, symbolizing unity through creative expression, and an appreciation ceremony recognizing SCOPE’s many partners and collaborators. Exhibition spaces showcased installations by the Centre for Policy Alternatives, the Archive of Memory, and the Sri Lanka Barometer, all supported under the SCOPE initiative.

The ceremony served as both a celebration and reflection, underscoring the collective effort that shaped SCOPE’s success and reaffirming the shared commitment of Sri Lanka, the EU, and Germany to promote dialogue, inclusion, and unity across the nation.

Colombo, November 7 – The Ministry of Education, Higher Education, and Vocational Education announced that Sri Lanka’s school system will transition to a learning-centered education model focusing on practical knowledge and skills under the upcoming 2026 education reforms.

Addressing a press briefing held yesterday (6), Ministry Secretary Nalaka Kaluwewa stated that the reforms will be implemented for students entering Grade 1 and Grade 6 in 2026, marking the beginning of a long-term transformation in the education sector.

“A Grade 1 student who starts under this new reform will leave school after 13 years, around 2036 or 2037. So, this is a long-term process,” Kaluwewa explained.

Currently, Sri Lanka has 10,076 schools, with 12,626 Grade 1 classrooms serving 282,293 students, and 11,291 Grade 6 classes accommodating 323,896 students. Kaluwewa noted that these students will form the foundation of the reform rollout.

Teacher Training and Preparation

Kaluwewa emphasized that teacher training is a key component of the reform. The training program consists of two stages:

• The Training of Trainers (ToT) phase, conducted by the National Institute of Education (NIE), is 99% complete, with nearly 10,000 master trainers already trained.
• The second phase aims to train 136,065 teachers islandwide, using the master trainers, and is currently in progress.

He confirmed that all teacher training will be completed by December 31, 2025.

New Learning Materials and Parental Awareness

The Ministry has prepared 106 new learning modules for Grades 1 and 6 for the first term of 2026, with printing in its final stages and expected to finish by November 15. The materials will be distributed to schools before the new academic year begins.

An awareness program for parents will also be held in December 2025 to familiarize them with the upcoming changes in the education system.

Revised School Timetable

Kaluwewa announced that the duration of a school period will be extended to 50 minutes, as recommended by the NIE, to support practical and activity-based learning. Consequently, the number of periods per day will be reduced from eight to seven, while interval durations will be increased.

He clarified that the reform is not merely about extending school hours but about enhancing the quality of learning. The new timetable will apply to all grades:

• Grades 1 to 4 will follow a common schedule.
• Grades 5 to 13 will have an additional 30 minutes added to their school day.

Transport Coordination

Addressing potential transportation concerns, Kaluwewa said the Ministry has held discussions with the Transport Ministry, National Transport Commission, Road Passenger Transport Authority, and the Railway Department. All relevant agencies have agreed to adjust transport schedules to align with the new school hours.

Implementation and Access

Kaluwewa confirmed that all circulars related to the reforms have already been issued and are available on the official Ministry of Education website for public access.

He concluded by reiterating that the 2026 education reforms represent a major step toward a modern, skill-oriented, and student-centered education system designed to prepare Sri Lankan students for future global challenges.

Sri Lanka’s Minister of Foreign Affairs, Foreign Employment, and Tourism, Vijitha Herath, will undertake an official visit to Riyadh, Kingdom of Saudi Arabia, from November 8 to 11, 2025, to participate in the 26th Session of the General Assembly of the World Tourism Organization (UNWTO).

According to a statement issued by the Ministry of Foreign Affairs, Foreign Employment, and Tourism, Minister Herath will take part in high-level sessions of the UNWTO Assembly and hold bilateral discussions with counterparts from several member states.

The Ministry noted that Sri Lanka, a founding member of the UNWTO since its establishment in 1975, continues to play an active role in global tourism policy and development.

“The visit of Minister Herath is aimed at advancing Sri Lanka’s tourism agenda through enhanced collaboration with the UNWTO and its member countries,” the statement added.

The four-day session in Riyadh is expected to focus on sustainable tourism recovery, innovation, and investment, providing Sri Lanka an opportunity to strengthen international partnerships and showcase its ongoing efforts to promote tourism as a key driver of economic growth.

Bangladesh and Sri Lanka have agreed to enhance investment ties and explore port connectivity projects as part of a broader effort to strengthen bilateral cooperation, following the fourth round of Foreign Office Consultations (FOC) held in Colombo on Thursday.

The meeting — convened after an eight-year gap — was co-chaired by the Foreign Secretaries of both nations and served as a platform to review the full spectrum of bilateral relations while identifying new areas of collaboration.

Discussions covered a wide range of topics including trade, investment, connectivity, defence, tourism, education, agriculture, fisheries, youth development, culture, health, digital innovation, and people-to-people exchanges.

Sri Lanka highlighted its existing investments and vibrant diaspora presence in Bangladesh, inviting Bangladeshi investors to explore opportunities in infrastructure, logistics, agriculture, and tourism-related ventures. Bangladesh, in turn, encouraged Sri Lankan investment in its export processing zones, special economic zones, and API industrial parks, with a focus on high-potential sectors such as pharmaceuticals, hospitality, ICT, renewable energy, agro-processing, automobiles, and leather industries.

Both sides underscored the need to facilitate trade by streamlining regulatory processes, particularly for pharmaceutical product registration, and by advancing the work of the Trade Negotiating Committee and the Joint Working Group on Trade and Shipping. They also stressed the importance of private-sector engagement in driving economic cooperation.

Connectivity and shipping emerged as key priorities, with discussions centered on establishing direct port links between Chattogram and Colombo. Tourism cooperation was another focal point — Sri Lanka proposed initiatives to promote green tourism, while Bangladesh suggested developing joint tourism circuits highlighting tea and Buddhist heritage sites.

Showers or thundershowers will occur at times in Western, Sabaragamuwa, Central, North-western and Northern provinces and in Galle and Matara districts. Fairly heavy falls above 75 mm are likely at some places in these areas.
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The general public is kindly requested to take adequate precautions to minimize damages caused by temporary localized strong winds and lightning during thundershowers.