Sri Lanka’s tourism sector — one of the country’s vital economic pillars — narrowly escaped a major setback last year following a controversial and ill-conceived decision by the previous administration to outsource the visa-issuance process to a foreign consortium. The move, made without proper consultation or a transparent tender process, threatened to undermine the country’s fragile economic recovery and derail its International Monetary Fund (IMF)-backed bailout program.

At a time when tourism was expected to generate crucial foreign exchange to help stabilize Sri Lanka’s external reserves and meet revenue targets under the IMF Extended Fund Facility, the government’s decision to hand over visa operations at the Bandaranaike International Airport (BIA) to a consortium led by VFS Global drew widespread criticism.

The then Minister of Public Security dismissed the need for competitive tenders, even though the IMF’s Governance Diagnostic Assessment had explicitly warned Sri Lanka against the practice of accepting unsolicited proposals. This disregard for transparency raised questions about possible vested interests behind the decision — and risked damaging the hard-won progress of an industry already struggling to rebuild after the pandemic, the 2019 Easter attacks, and the 2022 economic collapse.

Tourism veterans, including the Sri Lanka Association of Inbound Tour Operators (SLAITO) and hotel associations, immediately sounded the alarm. They pointed out that outsourcing a vital national service to a private foreign firm without clear justification would not only erode public trust but could also deter potential visitors.

Industry experts warned that the confusion surrounding the new system and the steep hike in visa fees would discourage tourists, especially during the crucial 2024–25 winter season when arrivals from Europe and Russia typically peak. The government, however, refused to heed their concerns.

Tourism stakeholders cautioned that Sri Lanka was on course to miss its 2.3 million visitor target for 2024, a figure vital to sustaining the IMF’s revenue projections. Visa fees for non-SAARC nationals were raised to over US$100 per person, inclusive of new “service” and “convenience” charges, while even South Asian visitors faced higher costs — pricing Sri Lanka out of competition with destinations like Thailand, Vietnam, and Indonesia.

Amid mounting criticism, several civil society groups and industry figures petitioned the Supreme Court, challenging the legality of the VFS-led deal. In mid-2024, the Court issued an interim order directing the Controller of Immigration and Emigration to suspend the agreement and revert to the earlier system managed by SLT-Mobitel, which had been both cost-effective and locally operated.

Despite the Court’s directive, bureaucratic delays within the Department of Immigration and Emigration prolonged confusion. Tourists encountered mixed messages about visa processing, leading to reports of cancellations and travel hesitancy — just when Sri Lanka’s tourism campaign, “You’ll Come Back for More,” was beginning to show results.

The IMF, though publicly silent, privately expressed concern over the governance implications of such non-transparent procurement decisions, especially in a sector central to Sri Lanka’s economic rebound.

The political transition of September 2024, which brought the National People’s Power (NPP) government to office, marked a turning point. Recognizing the severity of the situation, the new administration acted swiftly to implement the Supreme Court’s directive and restore the previous Mobitel-run platform.

Within weeks, on-arrival visa services were fully reinstated, and the government announced a review of all foreign service contracts entered into during the previous administration. The move was welcomed across the industry as an example of decisive and transparent governance.

The NPP government’s intervention yielded immediate benefits:

• Restored Efficiency: The local SLT-Mobitel system, proven over years of use, resumed seamless visa processing and eliminated delays that had frustrated travelers.
• Lower Costs: The removal of inflated service fees made Sri Lanka’s entry costs competitive once again, particularly for middle-income tourists from India, Russia, and Western Europe.
• Rebuilt Confidence: Stakeholders regained faith in state institutions, and global travel agents renewed their commitments to promoting Sri Lanka as a reliable destination.

By the end of 2024, tourist arrivals reached 2 million, generating an estimated US$3 billion in revenue — a remarkable recovery considering the uncertainty that plagued the first half of the year.

The controversy exposed the dangers of opaque decision-making in a country still under IMF supervision. The visa outsourcing fiasco echoed earlier governance failures — such as the 2021 abrupt ban on chemical fertilizers — that had devastated agriculture and contributed to the 2022 economic collapse.

Both incidents underscore how non-transparent decisions, often justified in the name of “reform” or “modernization,” can have devastating ripple effects on livelihoods and investor confidence.

The IMF’s governance framework for Sri Lanka emphasizes three principles: transparency, competition, and accountability. The VFS episode violated all three. It also highlighted how policy missteps in key foreign-exchange-earning sectors like tourism could directly jeopardize the success of the broader stabilization program.

In its latest review, the IMF noted that tourism remains one of Sri Lanka’s best-performing recovery sectors, with 2025 arrivals projected to exceed 3 million, supported by greater regional connectivity, digital visa upgrades, and renewed promotional campaigns in India, China, and the Middle East.

Tourism currently contributes around 12% of Sri Lanka’s GDP, directly and indirectly employing over 400,000 people. The government’s medium-term goal — 5 billion dollars in tourism revenue by 2025 — is ambitious but achievable, provided stability and governance standards are maintained.

Encouragingly, the NPP administration has signaled a shift toward “people-centered tourism,” emphasizing sustainability, community benefit, and domestic participation in tourism infrastructure. Initiatives like the digital tourism roadmap and the revival of the Tourism Development Authority’s one-stop investor window are designed to streamline processes and prevent the kind of bureaucratic chaos seen in 2024.

Moreover, Sri Lanka is rebranding itself beyond beaches and heritage — positioning itself as a hub for wellness tourism, adventure travel, and eco-conscious experiences. These developments have been welcomed by the IMF and international investors, who see the sector as key to rebuilding the country’s foreign reserves and reducing debt dependency.

While the immediate crisis has been resolved, calls for accountability continue. Many in the tourism and civil society sectors insist that the visa outsourcing deal — which bore all the hallmarks of a corrupt arrangement — must be investigated thoroughly.

This renewed focus on accountability is essential not only for the tourism sector but also for the broader message it sends: that Sri Lanka’s economic recovery must rest on good governance, not political expediency.

The visa outsourcing saga stands as a stark reminder of how fragile progress can be when short-sighted decisions override national interest. Yet it also showcases the resilience of Sri Lanka’s tourism industry — and the positive difference that transparent governance can make.

In averting a crisis that could have cost the nation hundreds of millions in lost revenue, the NPP government not only stabilized a key economic sector but also reaffirmed that integrity, consultation, and accountability remain the cornerstones of sustainable development.

If managed wisely, Sri Lanka’s tourism story in 2025 and beyond could serve as a model — not just of recovery, but of how good governance can transform a nation’s economic fortunes.