The Sri Lanka capital market requires a strong national economic plan and deeper foreign currency participation to support growth of up to 9 percent, according to the Securities and Exchange Commission Chairman.
Sri Lanka capital market urged to drive investment and foreign currency listings for faster growth
Sri Lanka’s economic revival depends heavily on a stronger investment ecosystem, with the Sri Lanka capital market poised to become a critical driver of national growth if supported by a focused economic strategy. Securities and Exchange Commission (SEC) Chairman Senior Professor Hareendra Dissabandara called on policymakers to establish a targeted plan that could accelerate annual growth to between 8 and 9 percent while boosting investor confidence across the financial system.
Speaking at the Bridging Borders II financial dialogue in Colombo, Prof. Dissabandara emphasized that the SEC, as the regulator and facilitator of the market, is capable of overseeing around 20 percent of the investments required to reach such high-growth targets. He noted that Sri Lanka’s development ambitions will fall short without prioritizing capital market-based financing and more efficient investment flows.
Prof. Dissabandara urged the government to finance major public projects through market instruments rather than relying on traditional borrowing mechanisms. He cited Colombo’s Lotus Tower, valued at US$103 million and financed mainly through a loan from China’s Exim Bank, as a missed opportunity for capital market-led funding. If the project had been structured through local market participation, the country could have avoided loan repayments while allowing investors to share in its returns.
He compared this to the success of John Keells Holdings’ Cinnamon Life project, Sri Lanka’s largest private sector investment worth US$1.2 billion, which used market-based funding mechanisms to drive long-term sustainable returns. He noted that replicating similar models for large-scale infrastructure would help reduce debt vulnerabilities and enhance financial transparency.
Prof. Dissabandara also highlighted the urgent need to strengthen foreign currency participation within Sri Lanka’s investment landscape. While Asian markets face funding dominance from non-Asian currencies, the situation is even more pronounced locally, where non-Asian currencies account for 92 percent of activity. Sri Lankan rupee-based capital market participation is estimated at just 5 to 8 percent, indicating a clear gap in multi-currency financial products and investor attraction.
Referencing the Organisation for Economic Cooperation and Development (OECD), he noted growing international market integration provides advantages including stronger price discovery, lower borrowing costs, and higher resilience during domestic economic shocks. According to him, tapping into foreign currencies—especially regionally significant ones such as the Indian Rupee—will be vital to unlocking broader investment inflows.
Prof. Dissabandara called for the introduction of new mechanisms such as a multi-currency board at the Colombo Stock Exchange (CSE) to support listings in Indian rupees and other foreign denominations. He also encouraged issuing infrastructure-linked bonds under SEC oversight to channel capital efficiently to transport, energy, and technology development.
These reforms align with broader SEC initiatives focused on transforming the financial market’s structure. The commission aims to diversify listings, expand product offerings, and modernise the investment ecosystem. A centerpiece of this agenda includes listing state-owned enterprises (SOEs) to improve governance and increase market liquidity. The SEC also plans to demutualise the Colombo Stock Exchange to promote enhanced operational standards and regulatory independence.
On 14 October 2025, the Colombo Stock Exchange crossed Rs. 8 trillion in total market capitalisation, achieving 40.48 percent year-to-date growth. This milestone reflects renewed investor optimism, although Prof. Dissabandara believes sustainable improvement requires long-term structural reforms rather than short-term market momentum.
He also pointed to digital innovation as a strategic priority, with the introduction of new financial products such as digital assets expected to invigorate participation from younger and technology-driven investors. The SEC aims to attract foreign capital while strengthening domestic investor protection and market integrity.
Prof. Dissabandara reiterated that a comprehensive national economic plan must support these financial regulatory reforms. Strong collaboration among policymakers, businesses, and international partners would ensure predictable investment conditions and enhanced global visibility.
During the event, organized by the Indo–Sri Lanka Chamber of Commerce & Industry, industry leaders from both countries examined opportunities for Indian currency-denominated bond issuance and cross-border financial cooperation. Strengthening ties with India, Sri Lanka’s largest trade partner, could play a vital role in building confidence and unlocking long-term market expansion.
Sri Lanka stands at a decisive moment, with its capital market positioned to lead national economic recovery. A strategic shift toward foreign currency integration, infrastructure investment via market funding, and regulatory modernization could help position Sri Lanka as a competitive financial hub in the region. Prof. Dissabandara’s message remains clear: capital market growth must be central to the country’s future prosperity.