Sri Lanka is taking significant steps to attract foreign direct investment and investors as it recovers from a severe economic crisis. The country is introducing a landmark investment law to simplify existing complexities and make it more appealing to foreign investors.
The State Minister of Investment Promotion, Dilum Amunugama, has stated that Sri Lanka has successfully navigated the initial phases of debt restructuring talks with the International Monetary Fund (IMF). It has also undertaken significant efforts to restructure public sector institutions and address issues that arose due to the COVID-19 pandemic. Notably, inflation has been reduced from 67 percent to four percent, and loan repayments have commenced.
The new investment law, set to be unveiled by the first quarter of 2024, aims to make Sri Lanka a more investment-friendly destination. It will include incentives for foreign investors, and there are plans to offer free land ownership rights to foreign investors. An Investor Facilitation Centre will be established to provide support and address investor concerns.
Sri Lanka has set an ambitious foreign direct investment target of $1.5 billion for 2023, and it has made progress by realising $211 million in the first quarter of the year. The country is focusing on revitalising its agriculture sector, along with tourism and investment sectors, to accelerate economic recovery.
Debt restructuring discussions with the IMF are ongoing, and while the minister is optimistic about resolving pending issues, he acknowledges that not all IMF conditions can be met in the current situation. Debt restructuring is essential for Sri Lanka to achieve a 2.3 percent primary budget surplus by 2025, a key fiscal target set by the IMF. Once completed, Sri Lanka hopes to reduce its overall debt by $16.9 billion.
Sri Lanka’s external debt includes amounts owed to multilateral banks, bilateral creditors, and commercial loans. Bilateral creditors include nations like China, India, Japan, and others. The IMF has praised Sri Lanka’s recovery efforts and noted that the economy is showing signs of stabilisation, with an increase in gross international reserves and an easing of shortages of essential goods. The government’s efforts to attract foreign investment and streamline regulations are part of its broader strategy to revitalise the economy and ensure long-term financial stability.