The Planters’ Association of Ceylon (PA) has renewed calls on the Government to urgently reverse the 2021 ban on oil palm cultivation, warning that the decision has inflicted deep damage on the plantation sector, rural incomes, and the wider economy.

Oil palm, once hailed as Sri Lanka’s most promising crop diversification strategy, was introduced in 1968 but began expanding significantly only in the 2000s when Regional Plantation Companies (RPCs) sought alternatives to loss-making rubber. 

Encouraged by strong government backing, including tax concessions and formal approval to expand up to 20,000 hectares by 2016, companies such as Watawala, Namunukula, and Horana invested billions in nurseries, milling facilities, and research.

However, the abrupt ban in 2021 reversed decades of progress, resulting in the destruction of Rs. 550 million worth of seedlings and placing Rs. 23 billion in investments at risk. 

The PA warned that no compensation has been provided, leaving both companies and workers exposed. More than 5,000 direct jobs and 21,000 dependent livelihoods were tied to the sector, with oil palm workers earning nearly double the wages of their counterparts in tea and rubber.

The industry also generated over Rs. 2.5 billion annually in household income, particularly in rural areas where poverty is entrenched. Its sudden halt, the PA noted, has thrown many families into financial insecurity at a time when the national economy is already under stress.

Ripple effects have spread across industries reliant on crude palm oil. Refiners and manufacturers now face supply shortages and higher costs, while the Rs. 200 billion bakery and confectionery sector has reported price hikes in bread, biscuits, and margarine. Pharmaceuticals, personal care, and industrial products have also been disrupted, compounding the burden on consumers.

The economic fallout has been particularly damaging for Sri Lanka’s foreign exchange reserves. Annual edible oil demand is 264,000 metric tons, but local production now meets only a quarter of this requirement. 

The shortfall is bridged through imports, draining $35 million in foreign reserves annually. Over five years, this could exceed $175 million, an unsustainable cost for a nation struggling with recovery.

 The PA argues that environmental concerns cited in defence of the ban are misplaced. Oil palm cultivation in Sri Lanka was restricted to degraded rubber lands, not virgin forests.

Globally, palm oil is recognised as the most efficient vegetable oil crop, yielding 40% of the world’s vegetable oil on just 6% of agricultural land. Countries like Malaysia and Indonesia have adopted sustainability standards such as RSPO and ISPO certifications to ensure minimal ecological damage.

Highlighting the nutritional value of palm oil naturally trans-fat free, rich in vitamin E and antioxidants the PA insisted the crop can be produced responsibly in Sri Lanka. It urged the Government to adopt global best practices, integrate smallholder farmers, reform import taxation, and invest in research and traceability systems.

Citing India’s expansion of palm oil cultivation by 45% in five years, the Association said Sri Lanka, with ideal growing conditions, cannot afford to miss the opportunity. “At this decisive moment, we urge the Government to embrace palm oil as a core strategy for plantation revival, food security, and foreign exchange generation,” the PA stressed

Sri Lanka’s fragile path to fiscal recovery has exposed deep cracks in its taxation system. A new World Bank report has slammed the country’s heavy reliance on Value Added Tax (VAT), warning that the steep rate hikes, compounded by subsidy removals, have disproportionately hurt the poorest households.

 While VAT has helped boost government revenue, it has also fuelled inflation, raised the cost of living, and pushed thousands deeper into poverty. With the NPPP government preparing its 2026 budget, analysts say the urgent priority should be to shift the tax burden away from the poor and onto the wealthy.

Recent data highlights this stark dilemma. Sri Lanka’s economy grew by around five percent in 2024, largely buoyed by construction and tourism. 

Yet the benefits have not been evenly distributed. Poverty, measured at the international benchmark of living on less than US$3.65 per day, still affects nearly a quarter of the population, standing at 24.5 percent. 

On the fiscal front, revenue improved significantly: the primary surplus reached 2.2 percent of GDP in 2024, aided by VAT and the withdrawal of exemptions. The country’s tax-to-GDP ratio also climbed from a low of 7.3 percent in 2022 to about 9.2 percent in 2023. Even so, Sri Lanka lags behind many of its regional peers in overall revenue mobilisation.

The cost of these gains, however, has fallen heavily on ordinary people. The World Bank estimates that between 2022 and mid-2023, poverty increased by nearly four percentage points as a direct result of tax reforms and subsidy removals. 

The poorest ten percent of households lost about five percent of disposable income, while their risk of falling into poverty rose by almost two percentage points. Rising electricity tariffs and cost-recovery pricing hit hardest, stripping the poorest of already fragile incomes. 

Meanwhile, import duties and protectionist taxes on rice, maize and other staples have kept food prices 50 percent higher than in neighbouring countries, punishing the very groups least able to cope.

Despite these realities, Sri Lanka’s policymakers continue to lean heavily on VAT because it is a reliable revenue source. Globally, VAT tends to raise six to eight percent of GDP compared to one or two percent from income taxes. 

Yet, without strong exemptions for essential goods, VAT is inherently regressive, forcing low-income households to shoulder a heavier relative burden than wealthier groups. Critics argue that Sri Lanka’s reliance on consumption taxes while allowing loopholes and evasions in corporate and personal income taxes reflects both political weakness and policy inertia.

The World Bank and domestic experts agree on what must happen next. The 2026 budget must prioritise fairness by taxing wealth more directly. Higher income brackets, corporate profits, large properties and capital gains should be brought more firmly into the net.

VAT exemptions must be expanded to shield food, medicine and utilities, while welfare should be targeted at the poorest rather than delivered through blanket subsidies that benefit richer households too. Public sector wage and hiring reforms, along with digitised tax administration, would also reduce inefficiency and improve compliance.

Sri Lanka’s recent fiscal turnaround has been built on fragile ground. If the NPPP government fails to rebalance its tax policy, the country risks achieving macro-stability while entrenching social inequality. 

Taxing wealth fairly, protecting essentials, and reforming public spending may be politically challenging, but without these measures, stability will come at the cost of human welfare and social cohesion.

The Committee on Public Finance (CoPF) has granted approval for the 2026 budget estimate of the Commission to Investigate Allegations of Bribery or Corruption (CIABOC).

This decision was made during a Committee meeting held on Thursday (11) in Parliament, chaired by MP Dr. Harsha de Silva.

During the session, the Chairman emphasized the importance of granting financial autonomy to key oversight institutions such as the Bribery Commission and the Auditor General’s Department, similar to the financial independence enjoyed by the Central Bank of Sri Lanka (CBSL). He noted that such independence would allow these bodies to operate free from political influence and government control, thereby ensuring greater accountability.

The Committee further resolved to bring this matter to the attention of the Minister of Finance, who also serves as the President.

Additionally, Dr. de Silva highlighted the need to align the remuneration of the CIABOC Chairman, Director General, and members with that of the President of the Court of Appeal. He stated that as the salary of the Court of Appeal President is revised, the salaries of these officials should also be updated accordingly, and assured that necessary interventions will be made in this regard.

Members of Parliament Ravi Karunanayake, Harshana Rajakaruna, (Dr.) Kaushalya Ariyaratne, Wijesiri Basnayake, Sunil Rajapaksha, Nimal Palihena, Thilina Samarakoon, and Nishantha Jayaweera were also present at the meeting.

COLOMBO – Sri Lanka has advanced 15 places in the 2025 Global Democracy Index, marking one of the strongest year-on-year improvements worldwide, according to the latest Global State of Democracy 2025 report published by the Stockholm-based International Institute for Democracy and Electoral Assistance (IDEA).

The country is now ranked 58th with a score of 0.655, placing it in the mid-range across all four categories of the Global State of Democracy framework. Only Botswana (+20) and Mauritius (+23) recorded higher gains this year.

“Sri Lanka is among the top 25 per cent of countries in Civic Engagement and Electoral Participation. Over the last five years, it has seen advances in Elected Government, Freedom of Expression and Freedom of the Press, though declines remain in Freedom of Association and Assembly,” the report stated.

Sri Lanka, a lower-middle-income economy currently recovering from its most severe post-independence economic crisis, showed progress in democratic governance while much of the world witnessed declines.

Across South Asia, the picture was more mixed:

• India slipped three places to 73rd
• Pakistan fell to 113th (down three places)
• Bangladesh dropped sharply by 24 places to 151st

Globally, 94 countries saw a decline in at least one democracy indicator between 2019 and 2024, compared to only one-third making progress. Africa registered the steepest share of global decline (33%), followed by Europe (25%), while West Asia ranked lowest overall in democratic performance.

Positive examples highlighted include Botswana and South Africa, both of which held landmark elections in 2024 that strengthened democratic credibility.

European nations continued to dominate the upper tiers of the index, with Denmark, Germany, Switzerland, Norway, and Luxembourg among the leaders, alongside strong performers outside Europe such as Costa Rica, Chile, and Australia.

At the other end of the scale, Afghanistan, Burkina Faso, and Myanmar suffered the sharpest declines, while South Korea also posted notable setbacks. The United States ranked comparatively lower among OECD countries, standing at 35th for representation and 32nd for rights.