Sri Lanka earmarks millions to accelerate digital transformation in 2026 budget

The government of Sri Lanka has pledged to invest 35.6 billion Sri Lankan rupees (approximately US$120 million) to advance the digitization of various sectors across the country it its 2026 Budget. The commitment aligns with the island nation’s efforts to stand up a national digital identity system and a data exchange platform, among other milestones on its journey towards developing a robust digital economy.

President and Finance Minister Anura Kumara Dissanayake is confident that these initiatives will not only modernize operations but also ensure that digital access is inclusive and touches all parts of the nation. The President emphasized Sri Lanka’s potential to become a regional leader in setting up data centers, stating that there are several important steps that need to be taken to attract both foreign and local investments in this area. He pointed out that creating an appealing environment for investors is crucial, and this can be achieved by offering financial incentives, promoting the use of green energy, providing low-cost electricity during the initial stages of operations, and offering land at concessional rates.

As a first step in this initiative, the government has planned to allocate Rs. 500 million ($1.6 million) for the year 2026 to kickstart these efforts and create the necessary conditions for setting up data centers.

To speed up the adoption of digital technologies, the President announced that a simpler and faster approval process will be introduced for building digital infrastructure, like communication towers. This move is expected to make the construction process more efficient. Additionally, tax on new towers constructed under this program will be suspended for five years to further encourage investment and expansion in the digital technology sector.

To foster innovation and support the growth of the startup ecosystem, a new fund is set to be launched in 2026. The government has already allocated Rs. 1.5 billion ($5 million) under the Ministry of Digital Economy to kick off this initiative and provide the necessary support and resources to startups. Furthermore, the government is looking to establish “Virtual Special Economic Zones” through the Board of Investment. These zones are intended to operate practically and efficiently within Sri Lanka, aiming to boost exports and job creation.

The President also mentioned that the first digital National Identity Card will be introduced early next year, promising that this initiative will not be hindered by those expressing what he characterized as narrow-minded or baseless criticisms.

The integration of the Electronic National Identity Card (e-NIC) project with the Unique Digital ID (SL-UDI) system was revealed in May, and government officials announced plans to roll its investments in the two systems together in August.

Sri Lanka has shortlisted five Indian firms selected for the contract to operate its digital identity system  just days ago.

An additional allocation of Rs. 750 million ($2.5 million) is planned for the establishment of an AI data center to enhance Sri Lanka’s capabilities in emerging technologies. To make digital payments more accessible and convenient, all government transactions will be moved to a digital payment system, with no service charges and QR payment fees waived for transactions below Rs. 5,000 ($16).

The plan also includes tax waivers to encourage private investment in expanding internet coverage, broadband vouchers to support children’s online learning, and the establishment and reactivation of IT zones to support further growth in the country’s digital infrastructure and tech industry.

Article Topics

data center  |  digital ID  |  digital inclusion  |  digital public infrastructure  |  investment  |  Sri Lanka