Sri Lanka - Reforms for Growth, Resilience and Openness Development Policy Operation

Overview & Synopsis

The development objective of the Sri Lanka Reforms for Growth, Resilience and Openness (REGROW) Development Policy Operation for Democratic Socialist Republic of Sri Lanka is to boost investment and create jobs by supporting structural reforms that enhance competitiveness and improve economic governance. The operation, first in a programmatic series, works in two areas: enhancing competitiveness by lowering barriers to trade through a four year phase out of para tariffs under the National Tariff Policy, modernizing the investment climate via a new Investment and Trade Commission law and regulations, strengthening the financial sector with a unified Rescue, Rehabilitation and Insolvency Act for corporate and personal cases, and removing legal barriers to women’s work through amendment of the Shop and Office Employees regulations and broader labor standards reform; and improving economic governance by tightening transparency and discipline of tax incentives through amendments to the Strategic Development Projects Act and a forthcoming tax expenditure framework and Tax Administration Procedures Law, strengthening state owned enterprise oversight via a standardized credit risk assessment methodology and a new Public Commercial Enterprises Management framework with a Holding Company, increasing private participation and efficiency in the power sector through a national competitive procurement manual for energy projects, and upgrading the evidence base for policymaking with a new National Statistics Act and a National Statistical Council. The operation intends to reduce average import duties, raise foreign direct investment by Board of Investment (BOI) registered companies, resolve insolvency cases in court, increase women’s formal employment in hospitality, lift income tax revenue as a share of Gross Domestic Product, transfer major state owned enterprises to the Holding Company or market, mobilize private investment in energy, and improve the Statistical Performance Indicator (SPI), thereby supporting private sector led growth, job creation, and resilience.