WIRED FOR DIGITAL GROWTH

Prashanthi Cooray examines Sri Lanka’s journey towards a digital future

 Sri Lanka’s recent budget places the digital economy at the forefront of the country’s growth strategy. With the digital landscape evolving rapidly, the government’s road map aims to create an efficient and secure digital economy, poised to drive economic growth and improve public services.

The Deputy Minister of Digital Economy Eranga Weeraratne emphasised the importance of digitalisation in national development during his address at the KPMG Sri Lanka Budget Analysis 2025. He noted that Sri Lanka aims to increase its ICT workforce from 85,000 to 200,000 by 2030 to support digital innovation.

In addition, Budget 2025 outlines plans to roll out digital payment systems such as GovPay to streamline transactions between government, businesses and citizens. And the focus on digital governance aims to make public services more transparent, efficient and accessible, while reducing administrative bottlenecks and costs.

In line with these goals, the government has allocated Rs. 3 billion towards digital economy development, focussing on projects such as the introduction of a national digital identity card system to ensure that citizens’ personal data is accurately recorded and protected, and the establishment of a national data exchange (NDX) platform.

Sri Lanka’s digital economy strategy is moving towards more private sector involvement through Public-Private Partnerships (PPPs). Moving beyond reliance on government funding, the country is looking to attract investments in emerging technologies like AI, robotics and fintech.

New legislation is being introduced in support of this shift, including the establishment of an Apex Digital Economy Authority to regulate and protect the sector.

The goal is to grow Sri Lanka’s digital economy to over US$ 15 billion or 12 percent of GDP by 2030. Accordingly, a series of tax measures to stimulate investment in digital services have also been introduced – including the imposition of a 15 percent corporate income tax on export services.

Additionally, a new VAT rate of 18 percent will be applied to digital services provided through platforms in Sri Lanka with certain exemptions for services provided beyond our shores.

Sri Lanka is also taking steps to expand its digital infrastructure with initiatives such as a digital ticketing system to improve capa­city and reduce overcrowding in the tourism industry. This system will integrate tourists, law enforcement and other stakeholders into a unified platform, improving safety and customer experience.

The budget emphasises empowering micro, small and medium enterprises (MSMEs), which account for 75 percent of businesses and contribute 52 percent to GDP. MSMEs will receive support to adopt digital tools, improve efficiency and access new markets through tax incentives, subsidised software and e-commerce training.

Moreover, the push towards a cashless economy will benefit MSMEs by reducing transaction fees, and enhancing financial access through mobile banking and other fintech solutions.

With key investments, legislative reforms and a focus on innovation, the government aims to position the country for a tech driven future with the digital economy playing a crucial role in driving growth.

However, challenges such as inadequate infrastructure, limited access to technology in rural areas and resistance to change remain. Addressing these issues will require investments in digital infrastructure, as well as national campaigns to improve digital literacy, foster PPPs and engage international expertise.

While these initiatives could improve operational efficiency and create a more competitive economy, their success will depend on effective implementation and overcoming the challenges that may arise along the way.

Drawing on lessons from Australia’s Data and Digital Government Strategy, Sri Lanka could benefit from consultations with stakeholders to develop a comprehensive and integrated digital plan.

By incorporating feedback from the public, industry and government, Sri Lanka can ensure more effective execution and sustainable progress in its digital transformation.