Business

Is Sri Lanka heading for authoritarian statism?

Published

3 years ago

2022/08/30

Sahan Weerasooriya

Two affected sections in SL’s economic crisis: consumers and small traders. (File pic)

by Seneka Abeyratne

The immediate future of Sri Lanka is extremely bleak as the economic and political crises are continuing to reinforce each other in a synergistic manner. Because the government is totally bankrupt and unable to meet its external debt-service obligations, it is having difficulty securing bridging loans to finance imports of essential goods. Hence, a viable alternative to bridging finance should be found as soon as possible.

Since foreign currency reserves are negligible, government should seriously consider debt to equity swaps with bilateral donors (such as China, India and Japan) as well as bona fide private creditors to boost external reserves and enable the private sector to restore the supply-chain for essential goods and services. Desperate times call for desperate solutions. Government should seek to obtain a minimum of $ 25 billion through quick debt to equity swaps. Top contenders in this regard are ports, airports, Sri Lankan Airlines, large state-owned plantations, and other state-owned facilities or lands which could be utilized by foreign investors for a variety of productive economic activities. As the old saying goes, “We can’t have our cake and eat it.”

Large fiscal deficits create

macroeconomic instability

The fiscal deficit in Sri Lanka increased from 11.1% in 2020 to 12.2% in 2021, largely due to a decrease in the revenue + grants to GDP ratio from 9.1% to 8.7% and an increase in the expenditure to GDP ratio from 20.2% to 20.1% over the same period. This is not a sustainable fiscal path, which is why government is resorting to excessive money printing, thereby adding fuel to the fire of galloping inflation. The last time Sri Lanka registered a fiscal deficit of under 5% was in 1977. Large fiscal deficits create macroeconomic instability and discourage foreign direct investment (FDI). No country in Asia has prospered without a stable macroeconomic climate and substantial FDI inflows on a sustained basis.

Key elements of a macroeconomic

stabilization program

Both a stable and consistent macroeconomic policy framework and a robust business climate are necessary for attracting significant inflows of export-oriented FDI on a sustained basis. In this regard, transaction costs should be eliminated wherever possible. A macroeconomic stabilization program should focus on fiscal consolidation in the medium term. This will include (a) a substantial increase in direct and indirect tax revenue; (b) rationalization of recurrent and capital expenditures; and (c) the exercise of fiscal discipline in all public institutions. The program should be accompanied by a comprehensive external debt-restructuring exercise with a view towards attaining debt sustainability in the medium term. The relevance of debt to equity swaps should be critically assessed in this context.

On the revenue side, key policy reforms would include restoration of VAT and income tax to their pre-2019 levels and measures for achieving a substantial increase in the income tax to GDP ratio, which was only 1.8% in 2021. On the recurrent expenditure side, downsizing of the public service (including the military), restructuring/privatization of loss-making state-owned business enterprises (in all sectors of the economy), and a significant reduction of government subsidies could be viewed as three critical policy reforms. In respect of capital expenditure, the need for focusing future expenditures on infrastructure for supporting significant improvements in education, health, and export performance is critical.

On the monetary side, maintaining a flexible, market-float policy for the exchange rate is vital for stimulating exports, enhancing FDI inflows and foreign remittances, and promoting tourism. These are the main avenues for boosting foreign currency reserves in the medium to long term. Maintaining a tight monetary policy vis-à-vis high interest rates is also vital for reducing inflation and enhancing foreign capital inflows.

Market distortions retard

economic growth

Removal of market distortions is critical for stimulating increased private-sector development and for achieving a rapid and sustainable economic recovery. At present, imports are heavily controlled and regulated by the state due to the severe dollar crisis. However, without a liberal trade and investment policy, the economy is likely to remain stagnant as a wide range of imported intermediate goods are required by entrepreneurs in the manufacturing, processing and service sectors. Imports of intermediate goods (including fuel, fertilizer and agrochemicals) as well as consumer goods linked to tourism should hence be liberalized.

Import bans are tantamount to protectionism, which tends to drastically inhibit GDP growth. Protectionism discourages FDI inflows as well as foreign remittances through the banking system. Protectionism does not stimulate economic growth. On the contrary, it creates economic stagnation and widespread poverty and underemployment.

The Daily Mirror of July 26th reported that government may restrict fuel imports for the next 12 months due to the foreign exchange crisis. This will do more harm than good as it will worsen macroeconomic imbalances. A far better option is to liberalize fuel imports so as to create space for the private sector to supply the markets.

Generally speaking, with a few exceptions, the market, not the state, should determine the prices of goods and services available to consumers. A significant number of public enterprises and services would become profitable if they were exempted from price controls and permitted to adopt a cost-reflective pricing mechanism.

Authoritarian statism

What we are currently witnessing in Sri Lanka is the rise of authoritarian statism – a protectionist, state-dominated economic growth model similar to the one introduced by the Sirimavo Bandaranaike regime of the 1970s. The experiment proved to be a colossal failure, which is why this inward-looking, statist regime got booted out of power in 1977.

The private sector is the engine of growth, not the state. The shackling of the private sector is not the solution to the current economic crisis. What is needed at this time are deep structural and market reforms aimed at promoting private sector development as well as improved productivity across all spheres of economic activity so that Sri Lanka could become globally competitive in a wide range of exports.

The author is a retired economist/international consultant to ADB MANILA. He can be contacted at snabeyratne@gmail.com

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Business

First Capital Holdings records Rs. 3.23Bn Total Comprehensive Income for 9M FY2025/26

Published

2 hours ago

2026/02/13

Thilina Walpola

First Capital Holdings PLC, a subsidiary of JXG (Janashakthi Group) and a pioneering force in Sri Lanka’s investment bank landscape recorded a Total Comprehensive Income of Rs. 3.23Bn for the nine months ended 31 December 2025, compared to Rs. 4.53Bn in the corresponding period of the previous year. For the third quarter of 2025/26, the Group reported a Total Comprehensive Loss of Rs. 0.17Bn, after accounting for a dividend tax expense of Rs. 0.41Bn.

The Group’s Net Income before Operating Expenses for the nine months of 2025/26 amounted to Rs.6.33Bn compared to Rs. 7.69Bn reported in the corresponding period of the previous year. Trading income was primarily driven by the Primary Dealer and Corporate Dealing Securities divisions, reinforcing the Group’s positioning across fixed income and equity market segments.

The Primary Dealer division reported a Profit after Tax of Rs. 1.64Bn for the nine months ended 31 December 2025 (1st nine months of 2024/25 – Profit after Tax of Rs. 2.45Bn). The results include trading gains on the government securities portfolio of Rs. 1.66Bn and net interest income of Rs. 1.41Bn (1st nine months of 2024/25 – trading gains of Rs. 3.18Bn and net interest income of Rs. 1.31Bn), reflecting movements in yields and trading conditions during the period.

The Corporate Finance Advisory and Dealing Securities division recorded a Profit after Tax of Rs. 1.86Bn for the nine months ended 31 December 2025 (1st nine months of 2024/25 – Profit after Tax of Rs. 1.94Bn). The business unit reported total trading gains of Rs. 2.33Bn on its equity portfolio, compared to Rs. 2.23Bn in the corresponding period of the previous year, supported by market participation and portfolio positioning.

The Wealth Management division reported a Profit after Tax of Rs. 78.1Mn for the nine months ended 31 December 2025 (1st nine months of 2024/25 – Profit after Tax of Rs. 90.1Mn). Assets under Management stood at Rs. 96.4Bn as at 31 December 2025, compared to Rs. 115.9Bn as at 31 March 2025, reflecting market conditions and client portfolio adjustments.

The Stock Brokering division recorded a Profit after Tax of Rs. 166.3Mn for the nine months ended 31 December 2025, compared to Rs. 39.5Mn reported in the corresponding period of the previous year, supported by increased trading activities.

Commenting on the Group’s performance, Rajendra Theagarajah, Chairman of First Capital Holdings PLC, stated, “The operating environment during the period was shaped by shifts in interest rates, capital market activities, and fiscal adjustments. Against this backdrop, the Group’s performance reflects the structural strength of its capital markets platform and its ability to generate income across multiple market cycles while maintaining financial discipline.”

Dilshan Wirasekara, Managing Director / CEO of First Capital Holdings PLC, said, “Our priority during the period was to manage each business line with a clear focus on risk, liquidity and execution. Improved performance in stock brokering and consistent contributions from corporate finance reflect our ability to respond to market conditions while aligning capital deployment with client and market opportunities.”

Business

Keells Nexus introduces an all new Loyalty App

Published

2 hours ago

2026/02/13

Thilina Walpola

Keells is set to usher a new chapter in customer experience with the relaunch of Keells Nexus with the introduction of its all-new loyalty app on 13th February. For 25 years, Keells Nexus has been at the heart of Sri Lankan retail, pioneering coalition loyalty and even introducing mobile-based loyalty as early as 2014. The loyalty program is building on this legacy, combining state-of-the-art technology with richer, more personalized rewards and seamless integration across the Keells ecosystem with an intuitive mobile experience.

Today, Keells Nexus stands at over 2 million registered members, a reflection of the trust customers place in Keells and the brand’s commitment to improving the quality of life for the nation. The launch further strengthens Keells’ long-standing focus on tech-enabled retail efficiency, following innovative retail experiences to customers such as self-checkout counters and retail technology that drives efficiency such as advanced inventory management systems.

The new app therefore is the next logical step in this journey, bringing together rewards, offers, and account visibility in one intuitive, streamlined interface. The new Keells Nexus app brings together all deals, savings and partner offers in one place, giving customers complete visibility and control. Members can track their points in real time, scan a QR code at checkout to earn rewards instantly, and enjoy a more personalised, more connected shopping experience.

“At the heart of Keells Nexus is a simple but powerful belief that life is better when we’re connected,” said Nilusha Fernando Head of Marketing, Keells Supermarkets & Senior Vice President, John Keells Group.

Business

IDL, Clouds by SOZO and the Rukmini Tissanayagam Trust partner with the HSBC Ceylon Literary & Arts Festival 2026

Published

2 hours ago

2026/02/13

Thilina Walpola

The HSBC Ceylon Literary & Arts Festival 2026, taking place from 13 to 15 February at Cinnamon Lakeside, Colombo, promises to be one of those rare cultural moments that linger long after the last session ends. It is a gathering not only of writers, artists and thinkers, but of ideas, shared, challenged and celebrated in spaces where curiosity feels welcome.

The HSBC Ceylon Literary & Arts Festival 2026 is supported by several organizations through non-promotional CSR initiatives, including Clouds by SOZO and the Rukmini Tissanayagam Trust. International Distillers Limited contributes in a strictly neutral CSR capacity, providing logistical and resource support for the event without any brand promotion or product visibility.

The Festival celebrates Sri Lanka’s creative voice by showcasing literature, arts, and cultural talent from across the country. All supporting organizations participate solely in a philanthropic and educational role, ensuring that the focus remains on artistic expression and community engagement.

The Rukmini Tissanayagam Trust brings to the Festival a deep and enduring commitment to nurturing literature and the arts as essential pillars of society. Its work is driven by the belief that creative spaces are not optional additions, but vital platforms that shape how communities think, feel and engage with the world around them.

Speaking on this collaboration, Indhu Selvaratnam, Director of SOZO Beverages and Trustee

of The Rukmini Tissanayagam Trust, stated, “The Rukmini Tissanayagam Trust is delighted to partner with the Ceylon Literary Festival for the second time. We are deeply committed to enriching Sri Lanka’s intellectual and cultural landscape and admire the festival’s evolution in embracing literature, art, music, and initiatives that nurture emerging local talent. These efforts align closely with the Trust’s mission to support creative expression, and we look forward to continuing our support as the festival strengthens Sri Lanka’s global cultural presence.”

Adding a complementary dimension to this partnership is Clouds by SOZO, Sri Lanka’s premium mountain spring water brand, whose ethos of purity, sustainability and thoughtful living aligns naturally with the spirit of the Festival. Sourced from a pristine spring in the Knuckles mountain range, Clouds represents a return to authenticity, an idea that resonates strongly within creative and cultural spaces.

Speaking on the partnership, Dushyantha De Silva, Founder of SOZO Beverages (Pvt) Ltd, said, “The arts invite us to slow down, to observe, and to think more deeply, and Clouds comes from that same place of intention. Supporting the HSBC Ceylon Literary & Arts Festival is about being part of a space where ideas flow freely and thoughtfully. It’s a privilege for us to align with a platform that values creativity, dialogue and conscious choices.”

The HSBC Ceylon Literary & Arts Festival 2026 offers something increasingly rare: three uninterrupted days of ideas. Of language and imagination. Of conversations that do not require a screen to feel alive. It is a reminder of the power of gathering, of listening, discovering and engaging with perspectives that challenge and inspire.

As February approaches, the hope is simple: that more people choose to attend, to listen, and to support Sri Lankan creativity in all its forms. Because when a country invests in its writers and artists, it is not merely celebrating talent, it is shaping how it remembers, how it questions, and how it evolves.