By Dilina Kulathunga Courtesy Daily Mirror

• Arjuna Herath, the Chairman of the Board of Investment, the one stop shop for attracting investments in December announced that he would step down from his post by the end of this month, just under 16 months into his tenure
• Any tax incentive that the BOI wants to offer beyond what is currently there needs the IMF’s rubber stamp
• Sri Lanka does not offer any compelling reason for global industrialists or investors to relocate to Sri Lanka with its current tax policy and challenges
• Although the headline economic numbers are still solid, dissatisfaction and frustration is brewing under the surface among business circles over the manner in which the government has become a hostage to the IMF

Colombo, January 5 (Daily Mirror) – While Sri Lanka has managed to push its Foreign Direct Investments (FDIs) slightly atop the billion dollar mark in 2025, the International Monetary Fund (IMF) policies have put the country in a bind in having polices, particularly when it comes to taxation in making the country an attractive destination for international investors.

Sri Lanka has estimated to have attracted FDIs of around US $ 1.1 billion for 2025, little under twice as much as the US 614 million the country received in 2024.

Arjuna Herath, the Chairman of the Board of Investment, the one stop shop for attracting investments in December announced that he would step down from his post by the end of this month, just under 16 months into his tenure.

Any tax incentive that the BOI wants to offer beyond what is currently there needs the IMF’s rubber stamp and it is not forthcoming as the IMF considers them as revenue leakage.

It has transpired that during successive meetings held with the IMF by the government every revenue related proposal has been looked at by the IMF with heavy skepticism and they have shot them down under the premise that they tantamount to revenue leakage.

A Deputy Minister who engaged in discussions with the IMF said that the latter fails to look at these proposals holistically in light of the overall benefit to the entire economy. Instead they are only concerned about getting the revenue targets up, that too in isolation.

This is while there are many ways that the government can get its revenues up by providing concessions to the private sector.

Even the budget 2026 passed in parliament was very light on tax concessions and instead the government brought the value added tax threshold for businesses down to Rs.36.0 million per annum from an earlier Rs.60.0 million per annum.

Although the headline economic numbers are still solid, dissatisfaction and frustration is brewing under the surface among business circles over the manner in which the government has become a hostage to the IMF.

It isn’t immediately clear if Herath’s resignation has anything to do with his inability to get the government to shift away from the current rigid tax policy, aimed at attracting new investments.

Sri Lanka does not offer any compelling reason for any global industrialists or investors to relocate to Sri Lanka with its current tax policy and challenges.

The government has recently announced that they would moot the highly unpopular property tax by 2027 despite the Treasury coffers overflowing.

And all indications are also that the government is unlikely to disengage from the IMF come the completion of the four year programme next year.

This has raised concerns that the government lacks a coherent economic strategy and a clear understanding of the structural challenges facing Sri Lanka’s economy. Analysts warn that such gaps risk eroding market confidence and public trust, potentially undermining the administration far sooner than anticipated.