Foreign and domestic capital will both be essential to powering growth and building resilience in Sri Lanka’s post-crisis economy. As macroeconomic stability begins to take hold, the country must now work to position itself more competitively within the global investment landscape.
In this conversation, Ruvini Fernando, Head of Strategy, Risk & Transactions at Deloitte Sri Lanka and Maldives; Manish Aggarwal, Partner – Strategy, Risk & Transactions, National Leader – Infrastructure & Capital Projects at Deloitte India; and Lasanga Abeysuriya, Commercial DD, Valuation & Modelling Leader at Deloitte Sri Lanka and Maldives share their perspectives on the country’s current investment outlook and the opportunities ahead. Drawing on regional lessons, they explore what Sri Lanka must prioritise to attract long-term capital, ranging from public-private partnerships and regulatory clarity to deeper capital markets and improved infrastructure delivery.
Let’s start with what it takes to put Sri Lanka on a faster growth path and a more prosperous economy. What does mobilising capital for investment and growth play in this process?
Ruvini Fernando: We’re at a key point in our economic recovery. Macroeconomic indicators have stabilised, and recent Central Bank data shows close to 5% growth in each of the last two quarters. To push for higher growth, we need more capital, both domestic and foreign. That means creating an environment where both local and international investors feel confident about investing in Sri Lanka. It also means more private sector capital is required as the government’s capacity to invest is limited.
Looking to India and its strong economic growth, what do you believe is driving it? Is it mostly private investment or is the state also involved?
Manish Aggarwal: It is important to understand that India has gone through investment cycles. Private sector investment was once high but dropped due to issues like non-performing loans and a weak credit cycle. Over the past 6–7 years, the government led capital expenditure, especially in infrastructure, to keep the economy moving.
As policies and macro conditions stabilised, investor confidence returned, and private investment began rising from about 20–25% of total capital to around 35% today. Today, the government still accounts for roughly 65% of capital spending.
What challenges must Sri Lanka overcome to raise its investment-toGDP ratio to around 35% like India?
Lasanga Abeysuriya: According to the BOI, Sri Lanka currently has over $4 billion in investment proposals, covering both new and expansion projects. That’s a positive sign. But the real challenge lies in converting these proposals into actual, on-the-ground investments.
Attracting credible investors, especially foreign ones who can catalyse additional capital, requires overcoming both macro-level and transaction-level barriers.
At the macro level, we need to build credibility by following through on deals and maintaining consistent policies. Investors have walked away after committing time and money to projects that fell through. Once that trust is broken, it’s hard to win it back. They also want clear, long-term sectoral plans to protect their investments and evaluate future opportunities. Scale is a similarly important consideration.
At the transaction level, the process often falls apart because projects aren’t properly prepared before going to market. Without strong pre-feasibility studies, key clearances, or a clear pathway through regulatory approvals, investors struggle to navigate the system, and this is especially true for foreign entities. Even local SMEs face challenges, as they may lack the bandwidth to manage complex approvals. Larger corporates might manage, but for others, the process is a barrier.
To move forward, Sri Lanka needs to ensure that bankable investment projects are identified, clearly defined, and supported by a streamlined approval framework before they’re offered to the market That’s what will turn interest into actual investment.
Manish: One of the biggest challenges right now is building investor confidence, especially given Sri Lanka’s current credit rating. Before anything else, investors need to feel secure about entering the market.
Two key factors shape that decision: political stability and currency risk. Political stability seems to be improving, and investors are beginning to absorb that. But currency risk remains a major concern. In many similar contexts, we’ve seen multilateral and donor agencies step in with guarantees or other mechanisms to help manage exchange rate risk. That kind of support is critical.
Beyond that, the first few projects brought to market, especially ones structured as PPPs, play a catalytic role. If those projects are well-structured, clearly aligned with sector priorities, and offer a fair risk-reward balance, they set the tone. They show that the country is ready, which builds momentum.
“One of the biggest challenges right now is building investor confidence, especially given Sri Lanka’s current credit rating. Before anything else, investors need to feel secure about entering the market.” Manish Aggarwal, Partner – Strategy, Risk & Transactions, National Leader – Infrastructure & Capital Projects at Deloitte India
Therefore, I believe the biggest challenges lie in investor confidence being tied to the country’s credit rating, the need to manage currency risk, and ensuring that initial projects are well-prepared and aligned with national priorities. Get those right, and everything else starts to fall into place.
If we set aside Sri Lanka’s credit rating and assume currency risk is stable for now, where do you think the country can find those catalytic projects? Which sectors or areas show the most promise
Ruvini:Sri Lanka should focus on sectors where we have a natural competitive edge. For large-scale capital and infrastructure projects, logistics stands out. Our location, capabilities, and the strong global ranking of the Port of Colombo make logistics highly attractive for investment.
Tourism is another promising sector. Visitor numbers are growing, and Sri Lanka can position itself as a unique destination. Unlocking local resources like land will be key to attracting investment here.
Renewables also make sense. Globally there’s a push towards sustainability, and for Sri Lanka, reducing dependence on fossil fuels is vital. This sector offers a good opportunity.
Sri Lanka also has recently called for investor interest in the mining and minerals sector due to the availability of high-quality natural resources in the country, which have the potential to be converted to value added products and generate foreign exchange for the country. Attracting credible investors to this sector can lead to significant benefits but a clear policy framework around extraction and processing of natural resources is required.
Also, scale matters. Foreign investors look for a strong pipeline of sizeable projects to make Sri Lanka worth their attention. Since we are a small economy competing in a dynamic global market, having enough projects at scale is critical to attract foreign investment.
Is investment in ports, logistics, tourism, and renewables mostly expected to come from foreign capital? What can Sri Lanka do to attract both foreign and local investment in these sectors?
Lasanga: The challenges previously mentioned apply to both local and international investors. One key factor is scale and how investors perceive risk. Local investors may be less concerned about risks like currency fluctuations, which are more significant for foreign investors. Predictable policies, clear rules and contract enforceability are matters any investor will want to see – not just to measure expected returns, but to also evaluate the likelihood of such returns materialising. Addressing these risk perceptions is crucial to attracting both types of capital.
Manish Aggarwal
Partner – Strategy, Risk & Transactions, National Leader – Infrastructure & Capital Projects at Deloitte India
One of the additional challenges Sri Lanka needs to address is the limited range of capital market and project finance products available for investors. Investors are more likely to commit longterm capital when they have credible exit or monetisation pathways. This is why structured finance instruments — such as project bonds, revenue-backed securities, infrastructure REITs, and take-out financing mechanisms — are essential. These tools help improve investor IRRs or meaningfully reduce exit risk.
Manish: Capital for projects comes in two forms: equity and debt. In most markets, local banks provide the debt because foreign debt is usually more expensive, with added costs like exchange rate risks and hedging.
So, while attracting private capital is important, we also need bolder reforms in the banking sector. For example, consolidating banks to strengthen their balance sheets will help them lend more effectively to support project financing as the economy grows.
A larger bank balance sheet can lend more, and competitively, to projects. It’s about both scale and price. Capital markets are another important source of capital, for domestic and foreign investors alike. To deepen and broaden these markets, one effective approach is reforming SOEs. By unlocking their value through reforms, productivity improvements, and restructuring, the government can take these enterprises to the capital markets and raise additional capital for key development projects without diluting shareholding interest.
This unlocks significant value, provides the government with more dividends, and encourages retail participation in the markets. As capital markets deepen, both foreign and domestic investors can better leverage them to raise equity capital.
If we can reduce the concerns regarding challenges with credit rating and past exchange rate volatility, where are the biggest opportunities to make reforms that will attract capital and deliver good returns?
Lasanga: Investors often compare Sri Lanka to other countries and look closely at reforms in areas like land ownership. Right now, restrictions on land ownership and limits on foreign investment in certain sectors can deter large investors who want more control. While some local private sector groups may have concerns, we need to focus on the bigger picture and attract major players who can transform these sectors.
Reforms around land ownership are essential. Labour laws also need attention, especially with SOE reforms. To improve productivity and run these enterprises more like private companies, there must be greater flexibility in labour regulations. This will help make these organizations commercially viable and attractive for private capital.
What other reforms should Sri Lanka focus on to attract both foreign and local capital?
Ruvini: Let me expand the conversation slightly beyond reforms. To attract large capital, especially as Sri Lanka emerges from its crises, we need to make the investment climate more appealing to external investors. Incentives for big projects will be critical.
While broad tax holidays or incentives are tough for Sri Lanka to offer right now, some form of motivation for large, important investments is necessary. We’re competing with many other economies that provide such incentives, so this can’t be ignored.
Manish: Continuing on that point, it will be key to implement SOE reform as well as broaden access to the capital markets. We also have a draft Public-Private Partnership (PPP) Act which was open for consultation. That’s an essential reform, because launching major projects with out a clear legal framework isn’t viable. The PPP Act will help define how deals are structured and governed, which is critical for investor confidence.
Beyond that, infrastructure and financial services are the two main pillars that drive economic growth and private investment. Within that, the SME sector is hugely important, since it contributes nearly 50% of Sri Lanka’s GDP. Bringing SMEs more fully into the formal financial system and improving financial inclusion are vital.
We need to make capital more accessible and affordable for SMEs so they can be more competitive. They’re essential engines of growth, alongside foreign and domestic private capital.
If we can advance reforms in these areas — SOEs, capital markets, the PPP framework, and SME financing — we’ll lay a much stronger foundation to attract investment and build long-term economic strength
What has India’s experience been with public-private partnerships? Have these projects mostly been awarded through competitive bidding?
Manish: : India’s PPP journey wasn’t a success story from the start. It has had to evolve over time. We’ve learned through trial and error, gradually improving the framework, and it’s become far more mature since its inception. Today, PPPs are active across several sectors.
A key lesson is the importance of stable policy and a reliable regulatory environment. These projects run on longterm concessions, in periods of 25 years or more, so any instability can disrupt business viability a few years in. Policy certainty is crucial for private sector confidence.
Lasanga Abeysuriya
Commercial DD, Valuation & Modelling Leader at Deloitte Sri Lanka and Maldives
Where we’ve seen success is when projects are well-structured, with thorough feasibility studies and clearly defined risk-reward balances. Initially, governments tend to offload all risks onto the private sector while expecting strong returns, but that’s not sustainable. Risks the government is better positioned to manage should stay with the public side, while the private sector takes on what it can handle. Sectors like airports and roads are major PPP success stories. Airport PPPs transformed the sector, and roads reduced logistics costs and boosted manufacturing competitiveness.
In renewables, progress came after structural changes. Though the sector opened in the early 1990s, real scale only came in the past 5–6 years.
“At the macro level, we need to build credibility by following through on deals and maintaining consistent policies. Investors have walked away after committing time and money to projects that fell through.” Lasanga Abeysuriya, Commercial DD, Valuation & Modelling Leader at Deloitte Sri Lanka and Maldives
A key change was addressing counter party risk through a central agency, the Solar Energy Corporation of India (SECI). Instead of private players dealing directly with individual states, SECI signed PPPs centrally and did back-to-back agreements with states. This reduced risk, lowered funding costs, and enabled larger bids from private players. Opening a sector isn’t enough. You need deep structural reforms to make PPPs viable and attractive.
In the last 5–6 years, political realities, at the centre as well as in the states, have increased public spending needs, especially in areas where private capital is unlikely to step in. At the same time, governments have to maintain fiscal discipline to protect credit ratings. That’s where alternative funding sources come in, especially through PPPs in sectors like roads, railways, and power transmission where existing infrastructure is upgraded or expanded, offering lower risk and steady returns for investors.
By monetising existing infrastructure, governments can raise capital and redirect spending towards social sectors like education and healthcare, which matter more to the broader population. PPPs allow the government to shift from being an operator to that of an enabler and regulator, creating space for private expertise while the state focuses public investment where it is most needed.
On the operational side, PPPs also bring in private sector efficiency, management skills, and technological innovation, and these areas are where government capacity and budgets tend to be limited. This has helped deliver better outcomes and higher-quality infrastructure.
As the PPP model stabilises and expands across more sectors, long-term investors like sovereign and pension funds have started participating, which is a strong signal of confidence.
Roads, renewables, transmission, and airports represent India’s most successful PPPs. These sectors have seen large-scale, competitive projects that delivered good returns for investors. We’ve also done some work in water, but that sector still has more room for development.
India and Sri Lanka don’t face the same PPP challenges, but given India’s success in sectors like roads and water, should Sri Lanka pursue those too?
Manish: I think it really depends on the country’s natural strengths. I agree that energy transition is key, so renewables make sense. Sri Lanka is also heavily tourism-focused, so ports and airports function as critical gateways that shape the tourist experience. Logistics is another priority, especially given the country’s reliance on agriculture. Without proper investment in logistics and cold chains, a lot of produce gets wasted.
I’d suggest Sri Lanka focus on four sectors to start with: renewables, ports, airports, and logistics. These are naturally aligned with its economy and offer strong multiplier effects. Roads and transmission may make more sense in the Indian context, but for Sri Lanka, these four are where the biggest impact will likely come
from.
Does Sri Lanka still need stronger regulatory structures to build investor confidence and lower PPP project costs by reducing perceived risk?
Ruvini: Regulatory structures are always evolving and in the power sector, for example, tariff setting is becoming more formalised. We’ve recognised the importance of cost reflective pricing and are steadily moving in that direction.
“While broad tax holidays or incentives are tough for Sri Lanka to offer right now, some form of motivation for large, important investments is necessary. We’re competing with many other economies that provide such incentives, so this can’t be ignored.” Ruvini Fernando, Head of Strategy, Risk & Transactions at Deloitte Sri Lanka and Maldives
Investors want predictability, and that only comes from stable and transparent regulation. In more commercial sectors like logistics, the regulatory environment is clearer. Pricing is market-driven, and demand and supply dynamics guide investor returns. But in sectors like power, where the state is the sole buyer, regulations need to be
more consistent, understandable, and investor friendly.
While we have initiated projects in the road sector, Sri Lanka’s traffic volumes might not yet justify PPPs. But public transport is a different story. It’s an area I’m quite passionate about. Having quality public transport, introducing proper pricing, and developing multi-modal systems by coupling bus services and efficient rail services with integrated transport hubs can be transformative for commuters. This supports productivity, reduces congestion, lowers fuel imports, and cuts time and cost for commuters.
It’s a space with huge potential for reform and investment.
Manish: In public transport, one approach is to modernise railway stations and make them bankable by developing and monetising the surrounding real estate. This creates revenue streams that can support the infrastructure upgrade.
One significant challenge in public transport, however, is fare pricing. Private sector returns often conflict with the government’s goals to keep fares affordable. That’s where models like Net Utility Tariff- (NUT) based contracts come in. Under these, the private investor is guaranteed a fixed return based on their capital and operating costs. The government then decides what user fares to charge the public.
These models help balance investor incentives with public affordability. However, many of them require some fiscal space or government support, which is currently limited in Sri Lanka. That’s why it’s important to prioritise sectors that require less upfront public funding and can still attract capital. As the macro situation improves and borrowing costs come down, more financially demanding models like NUT-based PPPs can be explored.
To be clear, PPPs will not be suitable everywhere. They span a range of models, from basic operations contracts to full private sector participation. Choosing the right model depends on where the country is in its reform and investment journey.
Ruvini Fernando Head of Strategy, Risk & Transactions at Deloitte Sri Lanka and Maldives
Alongside sectors like transport, are there other areas where creating regulation could open the door to private participation?
Lasanga: I think India has good examples of this. We’ve already talked about renewables, but one area that’s particularly topical now is battery energy storage systems (BESS). Sri Lanka’s recent BESS tenders show the growing need for energy storage, but a piecemeal approach may dissuade some larger players from participating and could raise overall costs. A clear national storage framework and a more programmatic approach to procurement would give investors better long-term visibility, attract a wider pool of bidders, and ensure storage is developed where it delivers the most value to the grid.
There are cases where regulations have mandated storage requirements for solar projects. If something like that had been in place earlier here, it could have helped avoid some of the grid challenges we’re facing today due to oversupply of renewables.
Where there’s a functioning merchant market for power and clear regulation for “power wheeling,” we see larger-scale private investments. That kind of setup not only helps reduce the cost to utilities and consumers but also gives investors more flexibility. They can sell power to the utility, and also trade any excess capacity on the grid, which improves their return on investment.
Power wheeling is a concept that allows electricity generators to sell directly to end users, like commercial or industrial customers via the national grid. Right now in Sri Lanka, the CEB is the sole buyer of all electricity. With power wheeling, independent producers could contract directly with consumers, increasing competition and efficiency in the market.
How supportive is India’s current electricity regulatory framework of market-friendly solutions?
Manish: Some of our earliest airport PPPs were launched even before a dedicated airport regulatory authority existed. To manage that risk, the concession agreements included clauses stating that if a regulator were introduced later, it would have to honour the provisions already agreed upon. This was important because a new regulator could otherwise come in and dispute how tariffs were set, disrupting the investment.
The broader point is this: if we wait for a full regulatory setup in every sector before launching PPPs, we might miss the momentum entirely. What’s important is to structure the first few projects carefully, with clauses that anticipate regulatory evolution and protect those initial agreements. We call this “grandfathering.”
This avoids the risk of future renegotiations, which we’ve seen in India can seriously damage investor confidence. Once that trust is broken, it’s hard to rebuild. Regulation is important, but overemphasising the need for it upfront can hold things back.
The regulator plays a crucial role in determining what constitutes a fair return for the private sector, assessing cost efficiencies brought in, and how tariffs or price adjustments are managed over time. It also protects the interests of the customer. As such, regulation is crucial regardless of the structure.
On the other hand, a strong PPP Act can be a great step forward, offering a clear legal framework for how projects are structured and awarded, even if sector-specific regulators are not yet in place. That in itself can give investors a measure of confidence to get started.
Are there examples of this happening in Sri Lanka?
Ruvini: There have been examples in Sri Lanka, like the port sector, where private capital was successfully mobilised and effective PPPs were structured even without a formal regulatory framework.
Looking at other quick-win opportunities, we previously discussed land availability, which is key. Our manufacturing sector currently contributes less to GDP than it could, while services dominate. To boost manufacturing and add more value to local resources, we need more developed economic and investment zones.
Creating well-structured, ready-to-use zones with infrastructure and utilities in place would make it easier for both foreign and domestic investors to set up business. Economic zones are a prime candidate for PPP models and could quickly spur manufacturing growth by providing a plug-and-play environment for industries to set up.
How is Deloitte, as a consultancy firm, positioned to play a role in such reforms?
Lasanga: Deloitte is a multi-disciplinary firm, which gives us a unique advantage: we can bring in experts from across our global network to address local needs here in Sri Lanka. We’ve been actively supporting reforms and investment efforts on both the public and private sector sides.
On the public sector side, we work closely with decision makers, regulators, and agencies by building capacity, preparing bankable projects, and conducting technical feasibility studies. We also provide thought leadership through regular consultations, sharing progressive steps taken in other markets to help create an enabling environment for investment in Sri Lanka. We spend significant time engaging with investment promotion agencies, the finance ministry, and other bodies to provide meaningful support to national efforts, share insights and feedback from investors, aiming to improve the investment climate.
On the private sector side, we assist organisations throughout their investment journey. For foreign investors unfamiliar with Sri Lanka, we help identify local partners, conduct commercial due diligence, and navigate regulatory and bureaucratic processes. We also support incorporation, financial modelling for project viability, tax structuring, and more to optimise setups in the country.
Additionally, we support the public sector with reforms and organisational restructuring to enhance attractiveness for investment, including technology transformations. For example, in the port sector, we have helped digitise operations to create a more efficient, one-stop investment destination.
Manish: At Deloitte, we take pride in working closely with both the government and private sector during important reforms. Whether it’s improving stateowned companies by upgrading their operations, technology, systems, and HR, or helping organisations get ready to enter the capital markets by meeting accounting and regulatory standards, we aim to be more than mere advisors.
We also support complex tasks like banking mergers, making sure the process runs smoothly from both HR and systems perspectives. We help design and monitor PPP projects to make sure they succeed over time.
With a strong local team and access to global expertise, we bring proven solutions that fit Sri Lanka’s specific needs. We are consultants, but our goal is to be real partners in progress.
When Deloitte engages with potential private sector investments, what are its goals?
Manish: At a broad level, clients pay for two things: capital and transformation. When you help raise funds or close M&A deals, the value is clear because capital flows in and clients are willing to pay for that result. The same applies when you drive measurable improvements, such as increasing a company’s EBITDA. Whether it is through technology, strategy, or market access, clients are paying for outcomes they can see.
They are less willing to pay for advice that does not lead to execution. That is why firms like Deloitte are moving beyond traditional advisory to also deliver implementation and operations. Clients value delivery and impact more than just recommendations.
What about the other side of the coin, when it works with governments?
Manish: On the government side, I believe our pitch should reflect reality in the present. The Sri Lankan government, unlike India, faces limitations in both funding and institutional capacity. In that context, I think our approach should focus on two things. The first of these is building local talent to ensure long-term sustainability. The second is in offering outcome-based support, where we are paid for results, not just effort.
Rather than working on fixed-fee models, we should define clear deliverables and link our compensation to their achievement. For example, this could mean a successful PPP that raises capital or a state-owned entity reaching the capital market. At that point, the government is more likely to have the resources to pay, or funding support from donor agencies can be mobilised.
Ruvini: Our vision is to support the growth phase that Sri Lanka is now entering. I agree that the way Deloitte delivers services is changing. It is not just about giving advice but also about following through with implementation and execution support. This leads to clear, tangible outcomes for our clients.
That is what makes this such an exciting time. The impact can be seen through increased investment flows and real transformation at the national level. Capital might come through banks, foreign direct investment, or capital markets. What matters is that we see measurable results.
This could mean new capital for growth, funding for restructuring, or gains in efficiency and productivity. In all cases, the result is the same: stronger performance, better outcomes, and greater value creation