Business

‘A coupon system that enforces quotas and rationing will not solve the balance of payments problem’

Published

4 years ago

2022/01/1

The media has reported that the government intends to implement a system of quotas for imports and the rationing of food and fuel. This is the latest in the long list of interventions over the last two years to address the growing balance of payments problems. Similar to previous measures this too only addresses the outward manifestation of a larger problem in the economy, but not its origin. Therefore, this policy measure too will ultimately prove futile.

The government took the right step a couple of months ago when they withdrew price controls on a few selected goods in the markets. Instead of further quotas and controls, what is needed now is to withdraw from further interventions in the financial and foreign exchange markets.

Sri Lanka has imposed an ever increasing web of controls on imports since April of 2020 but the trade deficit remains stubbornly high. In the period January-October 2021 imports rose by 26.5% and the overall trade balance grew by 34% to $-6,498m. This is despite a strong performance by exports, which rose 22.1%. The issue is not with exports but with imports caused by excess demand within the economy.

The government is running an extremely loose monetary policy, artificially holding down interest rates through interventions by the Central Bank. They are also running a large fiscal deficit, financed by Central bank credit or money printing. It is these two factors that are fueling domestic demand and as a result the spiral in imports. Curing the malady requires addressing its root, any other solution will at best only provide temporary relief.

Quotas and rationing – this is what a coupon system entails are cumbersome and costly to implement. They are also prone to corruption. Rationing will inevitably create black markets as coupons obtained by those best placed to acquire them are traded.

Existing import restrictions are hurting domestic trade, exports and consumers who face rising prices as a result of the shortages. People often characterise movement towards a larger trade deficit as “worsening,” this terminology is flawed and reflects a failure to appreciate that both imports and exports are beneficial for the smooth function of an economy.

Buying goods and services more cheaply than it costs to produce them at home, the nation benefits from imports. By selling goods and services in world markets, at higher prices for them than it could earn by selling only at home it benefits from exports.

What a country can produce is determined by the available resources. This also determines the standard of living of a country. Given the limitation of a fixed set of resources, if a country attempts to produce every single item that it needs it may not be very efficient in the way it utilises scarce resources. Shutting itself off from imports restricts the available inputs to local production.

There may be some things that can be produced efficiently while there may be others that do less well. It makes sense to allow a country to produce the things that it has a relative advantage at producing, and import what it does not. Thus imports are necessary for the growth of exports.

The proposed imposition of quotas will damage the economy even further and increase the suffering of citizens. The government needs to address the fundamental problem; tighten monetary and fiscal policy, free the currency and draw up a proper recovery plan that can prevent even further deterioration.

This will undoubtedly cause a shock – but will then allow trade and economic activity to resume. The alternative however is far worse; suppressing the symptoms of the disease will also stifle economic activity resulting in a slow, certain impoverishment with no hope of growth.

Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.

Advocata spokespersons are available for live and pre-recorded broadcast interviews via 077 4858401

CONTACT:

Yasodhara Kariyawasam

Communication Manager, Advocata Institute

Email: yasodhara@advocata.org

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Business

NDB reports all-time high earnings; doubles PAT on a normalised basis

Published

7 hours ago

2026/02/26

Sahan Weerasooriya

Kelum Edirisinghe - Director, Chief Executive Officer / Chair, Board of Directors Sriyan Cooray

National Development Bank PLC (hereinafter ‘the Bank’) announced its results for the financial year ended December 31, 2025 to the Colombo Stock Exchange recently. Full year results tabled by the Bank showcase a strong growth across all business lines with Net Banking Revenue increasing by a 45.2% on a comparable basis.

Like most other peers, the Bank’s 2024 financial performance was positively impacted following the successful conclusion of the ISB debt restructure with a one-off impact on interest income, fee income and net impairments amounting to LKR 1.4 billion, LKR 0.7 billion and LKR 9.4 billion, respectively for the said year.

Fund based income

Net interest income (NII), which accounts for close to 75.0% of Bank’s total operating income, grew by 6.5% on a normalised basis. Despite pressure on interest-earning assets arising from the lower interest rate environment, the Bank’s disciplined margin management helped stabilise Net Interest Margin (NIM) at 4.0% for the year. On a comparable basis, excluding one-off exceptional items, NIM stood at 4.2%, compared to 4.3% for both scenarios in 2024. By the end of the year, the Bank had close to LKR 29.3 billion in Loans and Deposits under a special arrangement with its customer(s) with a netting-off feature (end 2024: LKR 19.6 billion).

Non-fund based income

Net fee and commission income reached LKR 8.1 billion for the year – representing a growth of 14.3% from LKR 7.1 billion in 2024 excluding ISB restructuring related fees. Key growth drivers for the current year were trade finance, credit and lending, digital banking and credit and debit cards.

Credit and operating costs

Credit costs for the year amounted to LKR 5.7 billion, reflecting a substantial reduction of 57.1% compared to LKR 13.2 billion in 2024, a testament to the Bank’s strong credit underwriting practices and focused efforts on collections and recoveries. The Bank’s success on account of the latter is best reflected in notably improved stage 2 and 3 loan stock which stood at 7.9% and 10.8% respectively at end 2025 as compared with 16.6% and 14.0% at end 2024. Stage 3 provision coverage also saw further improvement to 59.1% from 54.5% during 2024 showcasing the Bank’s prudent management of credit risk.

Operating expenses closed at LKR 19.0 billion for the year, marking a 13.1% YoY increase. This increase was primarily driven by routine staff-related increments and necessary market realignments, along with higher investments in IT infrastructure and business development undertaken during the year.(NDB)

Business

PMF Finance appoints Nishani Perera as Non-Executive Independent Director

Published

7 hours ago

2026/02/26

Sahan Weerasooriya

Nishani Perera

PMF Finance PLC has announced the appointment of Ms. Nishani Perera as a Non-Executive Independent Director, further strengthening the Company’s strategic oversight, governance framework, and board-level expertise as it continues to advance its transformation and long-term growth agenda.

Ms. Perera is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and brings over 19 years of experience across audit, assurance, advisory, risk management, and corporate governance. She currently serves as Partner – Audit & Assurance at Moore Aiyar and as Director of Moore Consulting (Pvt) Ltd.

Over the course of her career, Ms. Perera has gained substantial exposure to listed companies, banks, finance companies, and other regulated entities. Her areas of expertise include financial reporting under SLFRS/LKAS, audit and risk oversight, regulatory compliance, and the implementation of quality management standards. She has worked closely with Boards of Directors and Audit Committees on matters relating to financial reporting integrity, internal control frameworks, enterprise risk governance, and adherence to evolving regulatory requirements.

Ms. Perera holds a Master of Laws (LL.M.) from Cardiff Metropolitan University in the United Kingdom and a Bachelor of Science in Business Administration (Special) from the University of Sri Jayewardenepura. She is also an Associate Member of ACCA and CMA Sri Lanka, and a Fellow Member of AAT Sri Lanka.

Business

Capital Alliance deepens capital market presence with third Closed-End Fund Listing at the CSE

Published

7 hours ago

2026/02/26

Sahan Weerasooriya

(Left – Right): Ramly Rahman, Analyst – Capital Alliance Partners Ltd ; Praveen Kanagasabai, Vice President – Capital Alliance Partners Ltd: Mrs. Nilupa Perera, Chief Regulatory Officer – CSE; Rajeeva Bandaranaike, CEO – CSE; Vevaashgar Vathanatheesan, Assistant Vice President – Capital Alliance Investment Ltd (CALI); Ochitha Bandara, Analyst – CALI; Dimuthu Abeyesekera, Chairman – CSE; Ms. Pranavi Sivaruban, Analyst – CALI; Yasith Lakshan, Analyst – CALI; Rajitha Gunarathna, Assistant Manager – Capital Alliance Partners Ltd.

The units of the “CAL Three Year Closed End Fund” were officially listed on the Colombo Stock Exchange (CSE) recently. Accordingly, a total of 841,263,375 units of the ‘CAL Three Year Closed End Fund’ were listed by Capital Alliance Investments Ltd (CALI), a member of the Capital Alliance Ltd Group (CAL Group). The listing was commemorated by way of a special bell ringing ceremony on the CSE trading floor.

CSE CEO Rajeeva Bandaranaike speaking at the occasion remarked upon the rising demand for Unit Trusts: “When you look at funds, particularly unit trusts in today’s active capital market, we see a lot of domestic interest in the market with more investors entering. Funds, not only fixed income funds but also growth and balanced funds, can be the ideal vehicle through which new investors can enter the market. We see this interest reflected in the success of CAL’s Three Year Closed End Fund. More people are seeking to invest their money through professional fund managers.”