Sri Lanka’s capital market regulator has urged the government to integrate equity and corporate debt financing into its national growth strategy ahead of the upcoming Budget.
Speaking at a joint forum organised by the Securities and Exchange Commission and the Colombo Stock Exchange (CSE) on Tuesday, SEC Chairman Senior Professor Hareendra Dissabandara warned that the country cannot achieve sustained economic expansion by relying solely on bank credit and state borrowing.
Addressing institutional investors in Colombo, the SEC chief highlighted that while recent economic growth of 4 per cent to 5 per cent was encouraging following the recent economic crisis, Sri Lanka must target sustained expansion between 7 per cent and 9 per cent to meet its long-term development goals.
He explained that achieving such targets requires a clear financial strategy detailing sector-specific capital needs, pointing out that national policy since Independence has neglected the capital market in favour of commercial bank loans and foreign debt.
To address these structural limitations, the regulator called on the Ministry of Finance to introduce budget measures that incentivize stock market listings, introduce new financial instruments, broaden public participation, and consider listing commercially viable state-owned enterprises.
Prof. Dissabandara also addressed recent downturns on the CSE, attributing the slide to Middle East geopolitical tensions, elevated global energy costs, interest rate adjustments, domestic inflation, and foreign portfolio reallocations rather than widespread corporate weakness.
He observed that foreign capital exiting the equity market had largely shifted into government securities, proving that investor confidence in the broader economy remains intact despite short-term stock market volatility.
Tracing the All Share Price Index from 1985 to October 2026, the regulator illustrated how local equities have historically survived severe economic shocks to deliver strong long-term real returns, while cautioning investors against panic selling and short-term speculative trading in low-liquidity conditions.
Turning to market oversight, Prof. Dissabandara issued a firm warning against market manipulation, confirming that regulatory frameworks are actively enforcing compliance to deter rogue traders attempting to exploit current market conditions ahead of the Budget announcement.
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