US advises its investors to navigate Sri Lanka with caution

• Notes that international support had helped restore macroeconomic balance, but reforms needed to ensure long-term investor confidence
• Highlights openings in ICT, tourism, renewable energy, aviation and defense
• Points out regulatory opacity, land ownership restrictions, and bureaucratic inefficiencies continue to hamper investment

The United States cautioned its investors to tread carefully in Sri Lanka, saying that while the island nation has returned to economic stability and is opening opportunities across several sectors, persistent policy unpredictability, opaque regulations and structural weaknesses continue to cloud the investment climate.

In its 2025 Investment Climate Statement on Sri Lanka released in September, the US State Department said the economy “has stabilised under an IMF programme, supported by NPP-led political stability, an increase in foreign reserves, a positive GDP growth rate, and falling inflation.” 

It noted that international support had helped restore macroeconomic balance, but reforms are needed to ensure long-term investor confidence.

The report pointed out openings in ICT, tourism, renewable energy, aviation and defense sectors that remain attractive to US and foreign companies. 

US firms were pursuing projects in ICT, energy and infrastructure, while the SS$ 3.7 billion Sinopec refinery project stood out as the largest single foreign investment in recent years, the report highlighted.

However, the statement asserted that challenges remain since “although the NPP government continues to welcome foreign investment in principle, policy unpredictability has raised concerns among investors,” it said.

It noted that reforms planned for the country’s investment promotion agency, the Board of Investment (BOI) under the Economic Transformation Act had not moved forward, leaving the agency’s “weak structure” intact. 

“Regulatory opacity, land ownership restrictions, and bureaucratic inefficiencies continue to hamper investment,” the report said. It added that labour laws and governance issues further weigh on the business environment.

The State Department added that the NPP’s Marxist roots “have made investors wary, despite assurances that the government is committed to a market-oriented path.” 

It also highlighted delays in digitising trade and ongoing governance challenges as obstacles to improving the business environment.