Sri Lanka risks losing AI future without urgent investment push
The government positions Artificial Intelligence (AI) as a core driver of national economic transformation. But the financial commitment in the Budget 2026 behind this ambition remains insufficient, several IT specialists and industry heads said.
With only Rs. 3 billion allocated for AI development, national data platforms, and government-run data centres, the gulf between ambition and capability is widening and experts warn the nation may once again miss a historic technological opportunity.
A leading Sri Lankan AI researcher described the allocation as deeply unrealistic: “You cannot build a competitive AI ecosystem on a budget that barely pays for feasibility studies. The government is attempting an AI leap with pocket-change financing.”
Industry benchmarks support this view saying a single mid-scale data centre requires Rs. 20-40 billion, far exceeding the total allocation.
Beyond the central AI budget, the government proposes Rs. 500 million in incentives for international data-centre investors, including subsidised land, lower initial electricity rates, and green-energy subsidies.
Another Rs. 750 million is to be allocated for AI and cloud innovation, research centres, and scholarships. Smooth approvals of digital towers, tax exemptions, and new Virtual Special Economic Zones are proposed to attract export-oriented technology enterprises.
However, IT leaders argue these measures remain well below global standards. The CEO of a high tech company warned: “Sri Lanka has no, large-scale data centre, national AI cloud, and neither high-performance computing capability. Until these gaps are addressed, our AI goals remain political slogans rather than economic strategy.”
Even within government, there is quiet acknowledgment of the problem. A senior Finance Ministry official noted, on condition of anonymity: “The allocation won’t build infrastructure it will only help us prepare plans. Politically, AI sells well. Practically, the numbers fall far short of what’s required.”
Despite these flaws, there has been some regulatory progress. The newly passed Personal Data Protection Amendment Act No. 22 of 2025 offers the much-needed legal clarity-a foremost requirement in attracting hyper scale investors of data centres.
The upcoming Digital Economy Act, the new Digital Economy Authority, and a Cabinet-level Digital Economy Council would for the first time unify digital governance.
Another strategic asset of Sri Lanka is its geographical location. With the landing of the SEA-ME-WE 6 high-capacity submarine cable and robust regional connectivity via BBG, SMW4, MSC, and the Bharat-Lanka cable, the island could serve as a low-latency data and disaster-recovery hub for India, Southeast Asia, and Europe. But this potential hinges on modern infrastructure. A senior cloud engineer cautioned: “Connectivity is our goldmine. But without Tier-IV facilities, renewable energy stability, and skilled engineers, investors won’t commit long-term.”
Sri Lanka has a long history of missing transformative technology waves due to under-investment, policy inconsistency, and slow execution. The AI era may be the nation’s final chance to reset its digital trajectory.
As one industry leader observed: “If we fail to invest now, Sri Lanka will spend the next decade importing AI while the rest of Asia builds it.”
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