The 2026 Budget unveiled by Anura Kumara Dissanayake and his new National People’s Power (NPP) Government marks an ambitious push towards a digital economy.
At face value, allocating Rs. 35.6 billion to digital-infrastructure projects and advertising Sri Lanka as a forthcoming regional hub for data centres looks like the right strategic move.
But closer inspection reveals fundamental flaws: the environment for foreign and local digital investment is under-prepared, high-level digital literacy remains alarmingly weak, and the political credibility of the new government is still untested.
In his speech, Dissanayake flagged a “high potential to emerge as a regional hub for setting up data centres” and outlined initial steps: a Rs. 500 million allocation to that end, incentives such as tax suspensions for five years for new towers, and fast-track approvals for digital-infrastructure construction.
He announced a Rs. 1.5 billion grant to kick-start a startup fund under the Ministry of Digital Economy, the creation of “Virtual Special Economic Zones” (V-SEZs) to generate export-oriented digital jobs, and plans to issue the first digital National Identity Card early next year.
But the rhetoric belies important gaps. First, the groundwork for attracting foreign investmentespecially in high-end fields such as data centres and artificial intelligence is far from convincing.
The government appeals to “foreign and local investors through financial incentives, green energy use incentives, low-cost electricity and concessional provision of land,” yet no detailed roadmap accompanies the announcement. In effect, there is high spending on the digital economy without a mature strategy or ecosystem in place to make it work.
Second, Sri Lanka’s actual digital readiness remains weak. While the digital literacy rate stands at 64.3 percent of persons aged 5–69 (first half of 2024), the computer-literacy ratethe ability to use a PC on one’s own is only 36.4 percent. Furthermore, internet-user penetration as of early 2025 is only 53.6 percent of the population.
That means almost half the population remains offline or marginalised from the planned digital leap. If senior officials and decision-makers also lack strong digital skills and communication competence, the chances of implementing complex digital investments successfully are greatly reduced.
Third, the NPP government faces credibility questions. Several members of this new slate reportedly had links to past subversive activities.
While the government repeatedly emphasises a clean investment environmentfree from hand-to-hand dealings, bribery and favouritismit remains unclear how the transition will be enforced. In highly regulated sectors like telecoms, data centres and AI, investor confidence requires not just policy promises, but firm, transparent institutions and leadership capability. Without that, large sums allocated risk becoming mere headline numbers rather than transformational investment.
What needs to happen in the short run?
1. Publish a detailed digital-investment roadmap: The government must immediately release and adopt clear policy documents covering data-centre investment criteria, power-supply guarantees, land-allocation mechanisms, tax incentive frameworks and foreign-investment safeguards.
2. Accelerate digital literacy and capacity-building for public leadership: Launch a mandatory digital-executive-training programme for ministers, secretaries and senior officials to raise computer-literacy and communication skills.
3. Fast-track regulatory frameworks and data protection: The government must ensure the rule-of-law assurances to investors are credible and visible.
4. Focus on inclusion and rural connectivity: With over 40 percent offline and large literacy gaps in rural sectors, infrastructure spending should prioritise underserved regions.
5. Introduce accountability metrics and timelines: Each major project—data-centre hub, V-SEZs, national digital ID, broadband roll-out should come with measurable milestones and public progress updates.
In sum, the 2026 budget may have signalled a welcome shift in ambition. But spending big on the digital economy without the matching environment, literacy, governance and strategy risks creating a digital hype bubble rather than sustainable transformation.
If the NPP government wants to convert its digital-economy mantra into reality, it must move swiftly to strengthen its foundations, not just its line-items.
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