Business

Some Sri Lanka firms could be hit on import controls as reserves fall: Fitch

Published

5 years ago

2021/07/25

ECONOMYNEXT – Some Sri Lankan firms could be hit while firms in essential goods may be less affected and import substitution firms could benefit if import controls are tightened on weak external finances, Fitch, a rating agency said.

“Sri Lanka sovereign’s weak external finances will affect corporates importing non-essential finished goods such as consumer durables more than corporates importing essential finished goods such as pharmaceuticals, food or clothing,” Fitch said.

“At the same time, we believe restrictions are less likely in the near term on the importation of raw materials for the domestic manufacture of essential products such as personal care, or for those industries serving as import-substitutes such as tyre and footwear manufacturers.”

Inflated Reserve Money

Sri Lanka’s central bank has been injecting liquidity (inflating reserve money supply in excess of the external monetary anchor or peg) keeping interest rates and credit out of line with the balance of payments and triggering forex shortages.

The central bank has lost foreign reserves as the liquidity was used in state salaries and later in cascading bank credit, and the news money redeemed against foreign reserves for imports or debt payments at a non-credible peg (convertibility undertaking).

The convertibility undertaking has far shifted from around 185 to 203 to the US dollar since early 2020. After convertibility was restricted for trade transactions, as well as some capital transfers banks started to ration dollars.

Parallel exchange rates have also risen as a result.

Due to Mercantilist beliefs – which are also taught in Keynesian universities – monetary instability has been blamed on imports, and authorities tried to control imports.

In Sri Lanka oil often is blamed for currency falls, though liquidity injections in 2015 created a currency crisis as global oil prices collapsed.

However as credit driven by the new liquidity shifted to permitted areas, the trade deficit had exceeded the 2019 levels by May 2021.

In June some import restrictions were relaxed.

Non-Essential

Among Fitch Rated firms, consumer durables sellers were likely to be most affected.

“Singer (Sri Lanka) PLC (AA(lka)/Stable) and Abans PLC (AA(lka)/Stable) are the most exposed among Fitch-rated corporates to tighter import controls, due to the discretionary nature of their products,” the rating agency said.

“A tightening in import controls may exert pressure on both entities’ ratings, owing to low headroom. However, the availability of buffer inventories, a degree of local manufacturing, and potential group synergies in the case of Singer, could help mitigate the impact in the near term.”

Meanwhile firms that critics call crony import substitution firms which have actively lobbied politicians for protection in the past to create a domestic ‘black market’ at high prices could benefit.

“We expect sales volumes for domestic manufacturers to rise in the near term as they attempt to fill shortages created by import restrictions,” Fitch said.

“Therefore, corporates such as the domestic tyre manufacturer Ceat Kelani Holdings (Private) Limited (CKH, AA+(lka)/Stable), footwear manufacture and retailer DSI Samson Group (Private) Limited (DSG, AA(lka)/Stable), as well as electric cable producer Sierra Cables PLC (AA-(lka)/Negative), may be long-term beneficiaries as their products serve as import substitutes.”

Neutral

The impact on alcohol, beverage and phamarceuticals may be neutral.

“We believe pharmaceutical manufacturers and distributors such as Hemas Holdings PLC (AAA(lka)/Stable) and Sunshine Holdings PLC (AA+(lka)/Stable) are less likely to see tighter import restrictions despite significant import exposure,” Fitch said.

“This is because of the essential nature of their goods, and limited availability of their products in the local market.

“Hemas and Sunshine have limited domestic manufacturing capabilities for certain generic drugs, while around 90% of the pharmaceutical products they sell are imported.

“This is because domestic pharmaceutical manufacturing is at a nascent stage, with producers lacking the technological know-how and infrastructure near term as they attempt to fill shortages created by import restrictions.”

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Business

Cross-border supply chains seen as key to new business opportunities

Published

9 hours ago

2026/09/22

Sahan Weerasooriya

Dignitaries at the launching of the new dhal processing factory.

By Ifham Nizam

Australian High Commissioner to Sri Lanka Matthew Duckworth described Omega Traders’ latest investment in a modern dhal-processing facility as a strong example of how cross-border supply chains can translate into productive investment, local value addition and new business opportunities in Sri Lanka.

The investment, which adds a 150-metric-tonne-per-eight-hour-day processing capacity to Omega Traders’ operations, marks a significant expansion of the company’s manufacturing footprint as it celebrates 45 years in Sri Lanka’s food commodity industry.

Speaking at the inauguration of the new Lentil and Orid Dhal Processing Factory in Wattala, last Friday, H.C. Duckworth said the facility represented more than an increase in production capacity, pointing to the wider economic value created when Australian agricultural production is connected with Sri Lankan processing and distribution.

‘This facility is not operating on its own. It is part of a long supply chain and a trade partnership between Sri Lanka and Australia, Duckworth said.

His comments placed the Omega Traders’ investment within a broader commercial context: Australia brings agricultural production and established export capabilities, while Sri Lanka provides processing capacity, labour, market access and opportunities for further value addition.

The investment comes as Sri Lanka continues to look towards greater domestic processing and value-added manufacturing rather than relying solely on the import and distribution of finished commodities.

Dr. (Mrs.) Siddhika G. Senaratne, Director General/CEO of the Sri Lanka Standards Institution (SLSI), who attended the inauguration as Guest of Honour, highlighted the importance of quality assurance in food processing and the role of standards in maintaining confidence across the supply chain.

The facility is equipped with new-generation cleaning, processing, sorting and quality-control machinery, including advanced colour-sorting technology, automated systems and an in-house quality-control laboratory.

The additional capacity will support Omega Traders’ three principal Mysoor Dhal brands — Rainbow Jumbo Dhal, Komas Dhal and Rozanna Dhal — which serve different segments of the Sri Lankan market.

But the investment also has a distinctly local agricultural dimension.

Through its Orid Dhal operation, Omega Traders plans to source locally grown black matpe from Sri Lankan farmers and process it at the new facility.

That creates a domestic value chain linking farmers to industrial processing and consumers, while potentially increasing demand for locally produced agricultural commodities.

Duckworth said this type of business partnership could generate benefits for both countries.

‘Australia produces some of the world’s best agricultural products and we are very efficient and very capable at trading them. But that alone is not going to bring success to Australia. Just as building a factory like this is not going to bring success to Sri Lanka, he said.

‘It’s when we bring these entities together that our products produced in Australia can be processed in excellence here in Sri Lanka that enables this to be a success, the H.C. explained.

The investment therefore combines two complementary supply streams: imported agricultural commodities, including Australian-origin products, and locally produced black matpe for the Orid Dhal operation.

For Sri Lanka, the business significance extends beyond Omega Traders itself. Increased processing capacity creates demand for logistics, packaging, distribution, services and agricultural inputs, while supporting employment within the food-processing ecosystem.

Business

Ideal Motors makes history with multiple workplace excellence accolades

Published

9 hours ago

2026/09/22

Sahan Weerasooriya

Representatives from Ideal Motors (Pvt) Ltd receive top organizational culture and workplace accolades at the Great Place to Work® 2026 awards ceremony.

HR-led transformation places people, culture and business performance at the heart of the organisation

Ideal Motors (Pvt) Ltd,has achieved a significant milestone by securing multiple prestigious workplace and organisational culture accolades in 2026, reinforcing its position as an employer of choice in Sri Lanka’s automotive sector.

Among its latest achievements, Ideal Motors has been recognised as one of the 20 Great Workplaces for Young Talent in Sri Lanka 2026, ranked No. 1 and awarded the Gold Medal in the Small and Medium category of Best Workplaces™ in Sri Lanka 2026, and ranked No. 18 among Best Workplaces™ in Asia in the Medium Scale category—the highest-ranked Sri Lankan organisation in the category. The company also received Industry Excellence for Workplace Culture – Trading Industry.

The Young Talent recognition was presented at the Great Place To Work® CXO Forum 2026 held on 10 September 2026 at Cinnamon Life, Colombo. The recognition followed an evaluation of more than 100 certified organisations and highlights workplaces that create meaningful opportunities for employees under 35 to develop, contribute and grow.

At the Best Workplaces™ in Sri Lanka Awards Gala 2026, held on 11 September 2026 at Cinnamon Life, Colombo, Ideal Motors achieved another historic milestone by entering the Best Workplaces Sri Lanka list for the first time and securing the No. 1 Gold Medal in the Small and Medium category. The company also achieved No. 18 in Best Workplaces™ in Asia, reflecting the strength of its workplace culture beyond Sri Lanka.

These achievements represent more than a collection of awards. They reflect the transformation taking place within Ideal Motors, where people, culture and business performance are increasingly viewed as interconnected drivers of sustainable growth.

Over the past few years, the organisation’s HR function has evolved from a predominantly administrative role into a strategic business partner, with greater emphasis on employee experience, capability development, engagement, performance, communication, wellbeing, diversity and inclusion, and data-driven HR practices.

Business

AAC takes seat belt safety message to Colombo motorists

Published

9 hours ago

2026/09/22

Sahan Weerasooriya

AAC staff distribute seat belt safety material to motorists on Galle Face Centre Road, Colombo.

The Automobile Association of Ceylon (AAC) conducted a seat belt safety awareness programme in front of its headquarters and along Galle Face Centre Road, encouraging motorists and passengers to make seat belt use a habit on every journey.

AAC staff, working alongside officers of the Sri Lanka Police Traffic Division, distributed specially designed hanging tags and stickers to drivers. The material carries a clear reminder that seat belts protect drivers as well as passengers in both the front and rear seats.

The public awareness drive was held ahead of the requirement taking effect on 20 September 2026, under which seat belt use becomes mandatory for every occupant of a vehicle travelling on an expressway.

AAC emphasized that the regulation should be understood as a life-saving measure rather than only a legal obligation. Wearing a seat belt can help prevent occupants from being thrown inside or from a vehicle during a collision and can lessen the severity of injuries.

The Association said road safety legislation must be supported by sustained public education, visible enforcement and responsible behaviour by all road users. The participation of the Traffic Police helped the campaign reach motorists directly in a busy part of central Colombo.