Budget 2026, which was announced in November and is now in effect, marks an important checkpoint in Sri Lanka’s ongoing fiscal adjustment. While the headline measures set out the government’s priorities on revenue, administration and reform, their significance will ultimately depend on how they are implemented across the tax system, public institutions and the economy.
For businesses and professionals, the focus has already moved beyond announcements to the practical implications that will shape compliance costs, investment decisions and confidence in the policy framework.
Here, Sashi Jayakody FCCA, chair of ACCA’s national initiatives sub-committee and a contributor to ACCA’s proposals for Sri Lanka’s Budget, examines the key announcements and their potential impact.
The Budget introduced several measures aimed at strengthening fiscal stability. How do these complement ACCA’s proposals on VAT refinement, digital tax administration and green taxation?
The Budget’s focus on revenue consolidation and administrative efficiency broadly complements ACCA’s proposals, particularly in its recognition of digital tools and sustainability as levers for fiscal stability. Measures aimed at improving tax compliance and broadening the base resonate with ACCA’s emphasis on leveraging digital public infrastructure for VAT administration, including e-invoicing, digital payments and stronger data integration across institutions.
ACCA’s submission goes further by advocating targeted VAT refinement
However, ACCA’s submission goes further by advocating targeted VAT refinement rather than blanket adjustments, especially for sectors linked to public welfare such as healthcare, pharmaceuticals, education and transport. Similarly, while the Budget signals intent around green taxation, there is scope to sharpen implementation by pairing environmental levies with clear, bankable incentives, such as tax credits or preferential rates for businesses investing in renewable energy and resource efficiency.
The opportunity now lies in execution: ensuring interoperability between systems, safeguarding data integrity, and embedding sustainability objectives into the tax framework in a way that encourages behavioural change rather than simply increasing compliance costs.
Improving public financial management has been a long-term priority. How well does the Budget support this?
Improving public financial management has rightly remained a priority, and the Budget’s acknowledgement of governance and efficiency reforms is encouraging. This aligns with ACCA’s strong recommendation for a national, audit-enabled e-procurement system to enhance transparency, reduce leakages and improve value-for-money in public spending.
Digital procurement reforms succeed only when supported by clear roadmaps
That said, international experience shows that digital procurement reforms succeed only when supported by clear implementation roadmaps, institutional ownership and professional oversight. ACCA has therefore stressed the importance of real-time audit trails, data analytics and collaboration with professional accounting bodies to strengthen independent oversight.
The practical next steps should include phased roll-out across public entities, mandatory adoption timelines, capacity building for procurement and finance officers, and embedding IPSAS-aligned reporting standards to reinforce credibility and public trust.
SMEs continue to face financing limitations, high compliance costs and uneven digital integration. How effectively do the announced measures address these gaps?
The Budget recognises the central role of SMEs in employment and growth, and some measures move in the right direction. However, when assessed against ACCA’s recommendations, there remains an implementation gap particularly in addressing financing constraints, compliance burdens and uneven digital adoption.
ACCA has proposed a more integrated SME support ecosystem
ACCA has proposed a more integrated SME support ecosystem: targeted tax relief, simplified compliance, structured capacity-building in financial management and environmental, social and governance (ESG), and access to green upgrade loans linked to sustainability outcomes. A key differentiator is the recommendation for a unified digital SME platform that brings together regulators, banks and support agencies, reducing fragmentation and cost.
To be fully effective, Budget measures should converge around this integrated model, ensuring SMEs are not navigating multiple unconnected schemes but are supported through a single, digitally enabled interface that improves ease of doing business and access to finance.
Digital transformation remains central to economic competitiveness. How do you assess the Budget’s direction in this area, and what would help sustain momentum?
The Budget’s digital initiatives signal a positive commitment to modernisation, but ACCA’s submission outlines a more holistic digital economy vision, built on interoperability, cybersecurity and incentives for private-sector adoption.
Digital platforms deliver maximum value only when they are connected. ACCA has therefore emphasised integrating GovPay, SL-UDI and POS systems, alongside a national cybersecurity framework that addresses data protection, digital signatures and cybercrime. Equally important are incentives, tax credits, grants or concessional financing to help SMEs and businesses adopting ERP systems, e-commerce and digital accounting solutions.
The most constructive next steps would be to formalise ESG frameworks
Sustaining momentum will require moving beyond pilots to system-wide integration, clear governance for digital assets, and consistent policy signals that encourage private investment in digital capabilities.
Strengthening governance and mobilising sustainable financing were key elements in ACCA’s submission, especially around ESG standards, state-owned enterprise (SOE) performance frameworks and sustainability-linked financing. How do you interpret the Budget’s progress on these fronts?
Strengthening governance and mobilising sustainable finance are areas where the Budget shows emerging progress, particularly in acknowledging ESG and SOE reform. This aligns closely with ACCA’s recommendations on ESG financing standards, SOE performance frameworks and sustainability-linked funding instruments.
ACCA has called for standardised ESG indicators, performance-based management of SOEs, International Public Sector Accounting Standards-aligned reporting and independent professional oversight to reduce fiscal risks and improve accountability. The proposal to explore sovereign green or sustainability-linked bonds is especially important in restoring investor confidence and attracting long-term capital.
The most constructive next steps would be to formalise ESG frameworks, introduce performance contracts for SOE leadership, and anchor sustainable finance initiatives within a transparent governance structure, thereby reinforcing long-term discipline, credibility and resilience.
