Rs.30bn digital injection proposed in 2026 to spur economic transformation

By Nishel Fernando

The government has proposed a substantial allocation of approximately Rs.30 billion in Budget 2026 for a sweeping digitalisation drive, signalling a decisive shift towards transforming Sri Lanka into a modern, knowledge-based economy.

This significant investment aims to leverage digital technologies to overhaul standard business processes, enhance public service delivery and improve overall governance efficiency across the state sector.

Delivering the Budget Speech in Parliament yesterday, President Anura Kumara Dissanayake stressed the critical nature of this pivot, stating, “Digital economic development is a critical path to economic growth and global competitiveness that benefits all. Sri Lanka has missed many opportunities on its development path but this digitalisation opportunity should not be missed.”

This vision is backed by a government investment exceeding Rs.25.5 billion planned for 2026, with the potential to significantly grow the nation’s digital economy.

To accelerate the physical groundwork required for this transformation, the government has introduced crucial policy changes targeting infrastructure. The budget proposes a five-year tax suspension for new communication towers constructed under the digital technology expansion programme. This fiscal incentive is paired with a pledge to establish a simpler and faster unique approval process for such digital infrastructure, directly addressing long-standing industry bottlenecks.

Recognising Sri Lanka’s potential to emerge as a regional hub, the budget has allocated Rs.500 million as an initial step to attract investments in data centres. The government intends to create an attractive environment for foreign and local investors in this sector through financial incentives, green energy usage benefits, low-cost electricity at the initial stage and concessional land provisions, while simultaneously strengthening data security and privacy legal systems.

A cornerstone of this digital drive is the Sri Lanka Unique Digital Identity (SL-UDI) project, which will receive Rs.2.2 billion to establish a foundational digital ID system for all citizens. An awareness programme for SL-UDI is slated for early 2026, with the first digital identity cards expected to be issued by the third quarter of the year.

Significant measures are also proposed to transition Sri Lanka towards a cashless society. Effective from January 1, 2026, all service fees for electronic payments to government institutions will be waived. To further encourage digital transactions, the budget proposes enabling QR code payments worth less than Rs.5,000 to be made free of charge. An allocation of Rs.1.0 billion has been set aside to cover the costs of these government transactions and system improvements, with an additional Rs.500 million for related facilities and promotional programmes.

Beyond administrative efficiency, the budget aims to catalyse industry growth. A start-up fund will be established in 2026, with an initial government grant of Rs.1.5 billion (US $ 5 million) to accelerate ecosystem growth. Furthermore, Rs.750 million has been allocated to foster innovation, including funding for selected artificial intelligence (AI) projects and providing AI and cloud facilities for research in universities and schools. The government also intends to establish ‘Virtual Special Economic Zones’ through the Board of Investment to generate exports and employment.

This concerted focus on digitalisation indicates a strategy to use technology as a primary driver for enhancing transparency, fighting corruption and attracting investment. By heavily investing in foundational digital infrastructure and modernising revenue-collecting agencies such as Rs.3.2 billion allocated for the Inland Revenue Department’s RAMIS system, the state is laying the groundwork to reduce bureaucratic inefficiencies and secure a higher trajectory of long-term economic growth.

Total funding allocated for the digital drive in Budget 2026 is Rs.30 billion. This is a significant increase compared to the previous years, reflecting the government’s strong commitment to digitalisation.