Economic resolutions for 2026

By Dhananath Fernando

Originally appeared on The Morning

We all have New Year’s resolutions. Most of the time, they are not new at all. They are the things we always wanted to do, but never made time for, or never had the courage to start. So every year we repeat the same promise in different words, hoping that this time will be different.

Sri Lanka is not very different in 2026. As a country, we also have resolutions. They are familiar, inspiring, and regularly repeated. Yet they remain largely unfinished.

In many cases, we did not fail because we lacked effort. We failed because we misunderstood the problem. We kept chasing outcomes without fixing the process.

For years, our national resolution list has looked more or less like this:

• A trading hub in the Indian Ocean

• Export diversification

• A tourism paradise

All three are still worth keeping for 2026. But if we want them to be more than slogans, we have to turn them into a reform checklist and not just a speech.

Trading hub is not about ships

Becoming a trading hub is not primarily about the ocean, shipping containers, or building warehouses near the port. It is about building a policy environment that attracts competent people and serious capital, and allows them to move goods quickly, add value, and serve markets.

Trading hubs do not manufacture everything they consume. That is not the point. A trading hub brings things from all over the world, stores them, processes or packages them, trades them, adds value, and sends them back to where demand is. It is an ecosystem, not a factory.

That ecosystem depends on speed, predictability, and cost.

In Sri Lanka, the cost of trading is high not only because of distance but because of policy. Para-tariffs and complex border taxes raise input prices. Slow and discretionary Customs processes delay shipments. Barriers to entry in logistics and shipping reduce competition. Labour rules and immigration processes make it difficult to attract global talent or even short-term specialists.

If 2026 is serious about the trading hub dream, then the resolution is not to ‘become a hub.’ The resolution is to do the hard and unglamorous work: modernise the Customs Ordinance, simplify border procedures, reduce para-tariffs, and remove barriers for entry and ownership in shipping and related services.

We should also reform labour and entry processes so skilled foreigners can work here easily, contribute, and move on if needed. Trading happens when trading becomes easier and cheaper than in competing countries.

A hub is not declared. It is designed.

Export diversification cannot happen on speeches

Export diversification has been discussed for so long that it has become a classroom lesson. Yet our export basket remains narrow and our transformation has been slow.

The reasons are not mysterious. They are structural.

Export diversification depends on factor markets working well: land, labour, and capital.

In Sri Lanka, land is difficult to use productively because ownership, access, and clear titles are complicated. Labour shortages are real, but the deeper problem is skills. A modern export economy requires technicians, designers, engineers, supervisors, and managers, not only workers. Capital is also a constraint, and capital for new industries often needs to come from outside through foreign direct investment.

But investors do not move money just because a country ‘needs dollars.’ They look for a level playing field, regulatory predictability, and access to markets. They also look for reliable infrastructure and a stable macro environment.

So if 2026 wants export diversification, the resolution cannot be another line in a policy document. It has to be a shift in how we attract and support investment.

The Board of Investment must be strengthened and reoriented towards active investor facilitation, not paperwork. Industrial zones should be opened to professional private sector operation and management. The country must actively pursue market access and trade facilitation, because new industries will not come if they cannot sell competitively.

Diversification is not a solo act. It is a system working together.

Tourism paradise needs policy, not posters

Tourism is often marketed with sunsets and smiles. But higher-spending tourists do not arrive because we printed better brochures. They arrive because the product is better and the experience is seamless.

If Sri Lanka wants to be a tourism paradise in reality, then the policy environment must help the sector upgrade.

Hotels should be able to renovate and expand without construction costs being inflated by tariffs and restricted access to quality materials and modern designs. We cannot talk about high-value tourism while making it expensive to build high-quality tourism infrastructure.

Airports and connectivity matter too. Capacity constraints and slow expansion weaken the entire tourism plan. And aviation needs competition, not protection. Monopolies and market distortions in aviation may keep certain entities alive, but they keep the country small.

Tourist destinations also need better services. That means managing and leasing services properly, creating space for private investment, improving safety and cleanliness, and creating real spending opportunities beyond hotel walls. A tourist cannot spend money if there is nothing to do, nowhere to shop, and no quality experience to buy.

A tourism paradise is built on policy decisions, not on slogans.

The resolution underneath all resolutions

There is one resolution that sits underneath all the others: monetary stability.

None of the above dreams work if inflation rises, the exchange rate becomes unpredictable, and confidence collapses. Businesses do not plan long-term investments when the value of money itself is uncertain. Tourists do not come in large numbers when macroeconomic instability turns into shortages, controls, and political tension. Exporters cannot build stable supply chains when the policy environment swings with every crisis.

In that sense, the country’s New Year’s resolution is not only about what we want to become, but about what we must protect: low inflation, a sound currency, credible fiscal management, and rule-based policy.

New Year’s resolutions, whether personal or national, are more about process than promises. Outputs come when the process is followed. Pronouncing the outcome without committing to the steps is how we fail every year, as individuals and as a country.

So perhaps Sri Lanka’s economic resolution for 2026 should be simple: stop repeating the dream and start doing the list.

Permits, privilege, and the price we all pay

By Thamirran Chuciyanthan

Originally appeared on Daily FT

“There will be no permits. The permit culture must end in Sri Lanka.” This was the resounding declaration from President Anura Kumara Dissanayake as he presented the 2026 Budget proposal. The plan to supply vehicles to Members of Parliament (MPs) on a strictly “return-after-term” basis echoes a long-overdue escape from a system that has, for decades, quietly drained public coffers. It is a system that has rewarded privilege over performance, entrenched inequality, and undermined the credibility of the state.

The Advocata Institute welcomes this decision. It is a vital critique of a “permit culture” that is a remnant of a feudal past, not a modern economy. A permit is, by definition, a special approval granting selected groups privileged access to benefits unattainable to the general public. It creates an inherently regressive, two-tier system: one for ordinary citizens, and another for those afforded special treatment.

When we examine the case of vehicle permits in Sri Lanka, the dynamic becomes disturbingly stark.

The anatomy of an exemption

To understand the magnitude of this reform, one must understand the distortionary nature of the “permit.”

According to Finance Ministry officials, since 2020 alone, 25,508 duty-free vehicle permits have been issued to Government employees. Even during the economic constriction of recent years, the flow continued: 6,062 permits in 2024 and 2,043 in 2025.

In Sri Lanka, vehicles are expensive because of import tax – a policy imposed and strengthened by Parliament since the 1960s. Issuing exemptions (permits) is, therefore, a fundamentally flawed rationale. It’s the equivalent of penalising an entire class, with no basis for the punishment to begin with, before releasing the favoured students from sanction – all the while cleverly disguising the exemption as a so-called “benefit”. And who are the first beneficiaries? The very policymakers responsible for the high taxes.

Evolution of privilege: From compensation to commodity

Originally introduced as compensation for low nominal salaries, the permit system morphed into a transferable asset and a reliable source of campaign financing. By importing vehicles at the fraction of its taxable price, or by selling the permit itself, MPs were able to generate substantial profits, untaxed, to fund electoral activities. In the decades that followed, eligibility expanded well beyond Parliament. The privilege was extended to senior civil servants and a wide array of public-sector professionals, including but not limited to doctors, university professors, State engineers, and directors of State corporations.

Eventually, permits had become a normalised perk in the public sector, issued as frequently as once every five years. However, this perk was driven not by performance gains, but lobbying pressure. No circular or audit report has ever tied permit eligibility to measurable performance. Entitlement was purely based on title or years of service, thus, creating a dangerously perverse incentive structure.

The result? Permits turned into a predictable political asset, attached to a significant transferable cash value. As vehicle import taxes increased over the years, the value of the permit increased proportionally. The permit itself became an appreciating asset, detached from its initially stated purpose, and thus began the trading of permits too.

In December 2010, Transparency International Sri Lanka revealed that the majority of 65 newly elected Parliamentarians, including 2 Cabinet Ministers, sold their duty-free vehicle permits for as much as Rs. 17 million each, when adjusted for inflation using Department of Census and Statistics figures, that windfall is equivalent to which adjusted for inflation sits at approximately Rs. 48 million today.

In December 2012, in an event the Sunday Times classified as a “Christmas Bonansa for MPs,” the Government granted permission for MPs to openly sell their duty-free permits. At the time, they sold for Rs. 20 million each, which adjusted for inflation sits at approximately Rs. 50 million today.

Consequently, we saw a worsened repetition of this in 2016.

Nagananda Kodituwakku is an attorney-at-law and rights activist, who formerly headed the Customs Revenue Task Force. On 28 October 2016, he wrote to the Commissioner General of Motor Traffic, naming 75 MPs who imported luxury vehicles, including BMWs, Mercedes-Benz, Land Cruisers and even a Hummer. The total tax waived per MP ranged from Rs.30 million to Rs. 44.7 million. In today’s terms, this range approximately translates to between a staggering Rs. 66 million and Rs. 98.5 million.

The numbers speak for themselves.

Since the permit artificially lowers the price of a vehicle for a specific group, they benefit from a subsidised (concessional) price. The relative price of a vehicle falls for members of this group, so demand rises, but this rise is not attributed to market forces. The sudden rise in vehicle purchases among permit holders is not a reflection of genuine need; it is a rational response to a market distortion. They buy not because they must, but because the tax exemption makes it financially irrational not to.

Mechanics of the loss

When a permit holder imports a vehicle, the State suffers a “double blow” to its revenue stream. First, the Treasury forfeits the revenue at the border. The list of waived taxes is exhaustive and compounding:

1. Customs Import Duty (CID)- Calculated as a % of Cost, Insurance and Freight (CIF)

2. Excise Duty (XID)- Calculated using engine capacity, fuel type, vehicle category

3. Social Security Contribution Levy (SSCL)

4. Luxury Tax (LTMV) – Applied when value or engine capacity exceeds specific thresholds

5. VAT (charged on a cascading* tax base: CIF + CID + XID + LTMV)

*This means this tax is calculated on top of the previous taxes, not just the original value of the vehicle.

Second, the State loses on income tax. In most tax systems around the world, law requires the benefit to be assigned an imputed monetary value, so that it may be taxed, just like income. But Sri Lanka’s duty-free vehicle permits have escaped this entirely.

The cost to the citizen

Sri Lanka’s cascading, multi-layered tax structure drives effective import taxation on most passenger vehicles into the 125%–250% range, with the Vehicle Importers Association of Sri Lanka placing some models in the 200%–300% bracket. It is, by any comparative standard, one of the most punitive vehicle-tax regimes in the world.

The macroeconomic consequences are visible everywhere:

Inequality: Middle-income families are priced out of car ownership; mobility becomes a privilege, not a right.

Inefficiency: High tariffs keep the national fleet old and costly to maintain. Older vehicles burn more fuel, produce higher emissions, and compromise road safety. As a result, public transport absorbs pressure it was never designed for

No industrial rationale: Sri Lanka does not manufacture cars, so these tariffs serve no protectionist purpose. These taxes function solely as revenue extraction, and our citizens and economy pay the price.

Tax compliance deteriorates. Consumer choice shrinks. Economic participation weakens.Productivity sours.

A future without exemptions

The move to a “return-after-term” model is the correct economic and ethical step.

Looking forward, the Government must adopt a centralised fleet-management framework. We should look to models like Australia’s, which utilises a single regulated system ensuring consistent pricing, transparent leasing, and the timely replacement of aging units to reduce maintenance costs.

The President’s declaration promises an end to a distortionary era. However, the future relies on vigilance. Citizens, media, and Parliament must ensure this commitment is honoured through transparent procurement and a permanent end to exemptions. The “permit culture” was a price the economy could never afford; it is time we stopped paying it.

Sources

Duty-Free Permits system under scrutiny | Print Edition - The Sunday Times, Sri Lanka

1991 Public Administration Circular No: 14/91

Scheme for Issuance of Motor Vehicle Permits on Concessionary Terms Nos. 01/2016, 01/20

Transparency International Sri Lanka

UNP MPs silent over daylight robbery: Sale of duty free car permits? | The Sunday Times

List of 75 MPs and their Luxury Vehicle Imports | Colombo Telegraph

Ceylon Public Affairs - Vehicle Import Tax Structure

Chapter 87, Motor Vehicle 2025 Tariff Guide

Quantification of Values for Non-Cash Benefits in calculating Employment Income

Ceylon Public Affairs - Vehicle Import Tax Structure

Chapter 87, Motor Vehicle 2025 Tariff Guide

Quantification of Values for Non-Cash Benefits in calculating Employment Income

Fleet Management - The Morning

Appendix

CCPI | Department of Census and Statistics

“Today” = Oct 2025. For inflation calculations, we chain-link across base changes:

1. Within a base, inflation factor between month A and month B =

Factor = Index(B) / Index(A) (same base series).

2. Across base changes, pick a bridge month that appears in both series. Multiply factors in sequence (“chain link”).

3. Multiply the historical amount by the product of factors to get the “today” value.

(The author is an Economic Researcher at the Advocata Institute. The opinions expressed are the author’s own.)