With India taking the lead, Sri Lanka hopes to attract $1.3 billion in FDI

The Sri Lankan government expects foreign direct investment inflows to rise by a fifth to $1.3 billion this year, with India likely to play a leading role.

Despite power cuts, fuel shortages, and soaring inflation, Sri Lanka managed to increase its FDI by 38% last year to $1.08 billion, according to the Board of Investment (BoI).

This bump was due in part to India's desire to limit China's expansion in its neighbor. A wind power project worth $442 million was signed by India's Adani group last year.

In the first quarter, Sri Lanka has received proposals worth $600 million, including 22 new projects and six expansions, said BoI Director General Renuka Weerakone.

There are untapped reserves of graphite, phosphate, and other minerals in Sri Lanka, but policy frameworks aren't updated yet, creating a bottleneck for foreign direct investment.

China has invested about $3 billion in Sri Lanka over the last decade, making up nearly a quarter of its FDI, while India has invested about $1.3 billion. In the last two years, India has taken the lead, followed by the United Kingdom in 2022 and the Netherlands in 2021. To help revive the $4 billion tourism industry, Sri Lanka is also planning to identify new islands for investors.