Business

Belated economic reforms: Lankans to swallow more ‘painful medicine’

Published

4 years ago

2022/05/2

Failure to implement required policy reforms at this critical juncture will be very costly, the Ministry of Finance says.

‘Accumulated issues in the past have now exploded

‘Time has come to put the house in order’

‘Dismal fiscal sector has caused imbalances in the macro-economy’

‘Engagement with IMF, a starting point in implementing critical reforms’

by Sanath Nanayakkare

The Ministry of Finance (MOF) said last week that Sri Lanka urgently needs to undertake difficult, but much needed and far-reaching reforms to address the accumulated and persistent issues in the country’s fiscal sector.

In a report titled ‘Fiscal Sector: Present Situation and Way Forward’, MOF pointed out that dismal fiscal sector performance has caused many imbalances in the macro-economy.

“Exceptionally low tax revenue, rigid recurrent expenditure, a large budget deficit, an accumulated and now unsustainable debt are the key concerns in the fiscal sector. Responsible and disciplined fiscal management has become more important than ever. In this process, the country and its citizens will have to go through a period of difficulty,” MOF warned.

The report further said:

“A strong social protection network is required for the vulnerable and needy segments as reforms will be painful.”

“The time has come to put the “house in order” and revamp the government’s fiscal operations to strengthen macroeconomic stability and facilitate economic growth in the medium to long term.”

“Deficit financing poses a critical challenge due to the shortfall of foreign financing following the loss of international capital market access. The resulting rise in monetary financing has caused severe macroeconomic imbalances.”

“The dismal performance of the fiscal sector over the years has contributed to macroeconomic instability and failed to support long-term growth. The excess aggregate demand generated by unsustainable fiscal deficits has resulted in elevated inflation, pressure on the balance of payments (BOP) and currency volatility.”

“Sri Lanka today is facing a severe BOP crisis with insufficient foreign exchange to buy essential imports such as food, energy,and pharmaceuticals, let alone meeting its debt service obligations. Sound macroeconomic fundamentals cannot be achieved without prudent and sustainable fiscal outcomes.”

“Accumulated issues in the past have now exploded and caused severe disruptions to the day-to-day lives of Sri Lankans, leading to widespread public displeasure and social unrest.”

“The fiscal sector performance in the recent past is characterised by exceptionally low government revenue, rigid recurrent expenditure, high budget deficits, and accumulated debt which is now unsustainable. The weak fiscal position has manifested in credit rating downgrades, loss of access to international capital markets and foreign financing. As a result, the government has increasingly relied on domestic financing of the budget, including monetary financing by the Central Bank, in turn leading to significant macroeconomic imbalances.”

“Government revenue declined particularly sharply in the last two years due to various reasons including the economic downturn caused by the COVID-19 pandemic, import restrictions imposed to ease the external sector pressure, but

most importantly, due to the ultra-low tax regime introduced in late 2019 and COVID-19 related easing measures in early 2020. Even before these tax cuts, Sri Lanka was a country with one of the lowest revenue-to-GDP ratios in the world, and the tax cuts drove Sri Lanka closer to the bottom of this list.”

“The government’s decision to seek the assistance of the International Monetary Fund (IMF) will be a starting point and a catalyst in implementing these critical reforms with the support of the citizens and other stakeholders.”

While acknowledging the fact that government fiscal operations have played an important role in improving economic and social conditions in Sri Lanka during its post-independence history, MOF went on to say that, “Failure to implement required policy reforms at this critical juncture will be very costly. However, it will lay a strong foundation to create a resilient economy for future generations.”

Central Bank Governor Dr. Nandalal Weerasinghe said on Friday that the Central Bank has taken measures required to stabilize the economy by taking the right monetary policy measures in terms of price adjustments and by increasing policy rates.

“Now, the fiscal side also needs implementing critical measures such as increasing state revenue by way of raising taxes. There is complete understanding on improving macro-economic fundamentals and decisions will be made to address the BOP issue, debt sustainability and enhancing state revenue in order to turn around the economy to a more resilient one,” he said.

The Governor noted that sooner the social and political stability were restored, the better it would be for stabilizing the economy and shifting it to growth path.

In September 2020, responding to a downgrade in credit ratings from Moody’s, a global rating agency, from a B2 to a Caa1, Sri Lanka’s Finance Ministry hit back claiming that such a report was ‘unwarranted, premature and reckless’.

In November 2021, former governor of the Central Bank Ajith Nivard Cabraal said that debt restructuring was underway without assistance from IMF and said, “We have to manage our debt without using the word ‘restructuring’ in a frivolous manner.”

All News Advertisement

Business

Sri Lanka educates women but keeps many out of work, ADB warns

Published

22 hours ago

2026/06/5

Thilina Walpola

Shannon Cowlin - ADB Country Director for Sri Lanka

Sri Lanka has one of the most educated female populations in South Asia, yet only about one in three women participates in the labour force, making female workforce participation among the lowest in the region and leaving a significant source of economic growth untapped.

That paradox took centre stage at a knowledge forum organised by the Asian Development Bank (ADB) in Colombo on June 3, where government officials, labour authorities, academics and private-sector leaders examined the deep-rooted barriers preventing women from fully participating in the economy and explored reforms needed to unlock their economic potential.

Opening the event, ADB Country Director for Sri Lanka Shannon Cowlin said the issue extends beyond gender equality and has become a critical economic challenge for a country seeking sustained growth and inclusive development.

“Empowering women to participate fully in the labour force is not only a matter of equality; it is essential for inclusive economic growth and poverty reduction in Sri Lanka,” she said.

The forum, held under ADB’s Serendipity Knowledge Programme (SKOP), focused on findings from a recent ADB-supported study exploring the factors behind Sri Lanka’s persistently low female labour force participation.

Cowlin noted that despite notable progress in education and human development, Sri Lanka continues to lag behind on measures of gender equality and women’s economic participation. She said multiple studies have shown that the factors shaping women’s labour force participation are layered, interconnected and multidimensional.

According to the study, many women remain concentrated in informal, low-paid and insecure employment with limited access to social protection and few opportunities for career advancement. Social and cultural expectations continue to place primary caregiving responsibilities on women, often restricting their ability to pursue careers or remain in full-time employment.

The lack of affordable childcare services, unequal access to digital skills and technology, concerns over workplace safety, sexual harassment and inadequate transport options were identified as major obstacles preventing women from entering or remaining in the workforce.

“These are complex challenges that require action from all stakeholders – government, development partners, the private sector, civil society and academia,” Cowlin said.

She stressed that improving women’s labour force participation would require more than isolated policy interventions, calling instead for structural transformation, stronger infrastructure and care services, progressive workplace practices and broader societal changes that improve women’s mobility, safety and economic agency.

The event featured a presentation by Professor Dileni Gunawardena of the University of Peradeniya, who shared findings from ADB’s study on female labour force participation, followed by a panel discussion involving representatives from the International Labour Organisation, the Department of Labour, MAS Holdings and John Keells Holdings.

Panelists discussed measures to improve the enabling environment for women, including greater investment in the care economy, expanded childcare facilities, enhanced skills development, creating safe, supportive workplaces and career pathways for upward mobility.

Participants agreed that increasing women’s participation in the workforce is not merely ‘a nice to have’ but an economic necessity, particularly as Sri Lanka seeks to accelerate recovery, boost productivity and achieve more inclusive growth.

The ADB said Sri Lanka’s economic recovery presents a unique opportunity to address long-standing structural barriers facing women and to build a more inclusive labour market that fully utilises the country’s human capital.

By Sanath Nanayakkare

Business

ComBank offers exclusive financial solutions to the ‘Guardians of the Skies’

Published

22 hours ago

2026/06/5

Thilina Walpola

Hasrath Munasinghe, Chief Operating Officer of Commercial Bank and Air Vice Marshal Rajinth Jayawardena, Director General Welfare of the SLAF exchange the agreement in the presence of representatives of the two organisations.

Reinforcing its commitment to those who serve the nation, the Commercial Bank of Ceylon has entered into a Memorandum of Understanding with the Sri Lanka Air Force (SLAF) to introduce a comprehensive suite of concessionary financial facilities for its officers and other ranks.

The partnership, unveiled in a year that marks the 75th anniversary of the Air Force, which was founded in March 1951 as the Royal Ceylon Air Force, reflects a shared recognition of the critical role played by the SLAF as the steadfast ‘Guardians of the skies,’ entrusted with safeguarding the country’s security and sovereignty.

Under the terms of the agreement, Commercial Bank will extend a range of specially tailored financial products to SLAF personnel, including personal loans, leasing facilities, housing loans and credit cards. These facilities will be offered at concessionary interest rates, alongside concessions on documentation charges, enabling Air Force personnel to access financial support on more favourable terms.

The Bank said the initiative is part of its continuing efforts to deliver best-in-class lending solutions that are both accessible and responsive to the diverse needs of its customers. By offering attractive and affordable repayment structures, the scheme is designed to empower SLAF officers and other ranks to meet their personal financial requirements with greater ease and flexibility.

A key feature of the programme is the ability for beneficiaries to align repayments with their income patterns, ensuring that the facilities remain practical and sustainable over the long term. This flexibility, combined with preferential pricing, is expected to make a meaningful difference to the financial wellbeing of Air Force personnel and their families.

Business

Treasury Bill rate hike compounds stock market volatility

Published

22 hours ago

2026/06/5

Thilina Walpola

The CSE was extremely volatile yesterday mainly due to external and internal negative factors.

‘The escalation of the war situation in West Asia and the proposed tariff hike on Sri Lanka’s exports to the US by the Trump administration are worsening Sri Lanka’s economic woes. Further, the government’s decision to increase the Treasury Bill rate has also created some uncertainty in the market, stock analysts said.

The All Share Price Index was up by 249.83 points, while the S and P SL20 rose by 67.61 points. Turnover stood at Rs 2.79 billion with 11 crossings.

Companies that mainly contributed to the turnover by way of crossings were: Chevron Lubricants 1.5 million shares crossed to the tune of Rs 294 million and its shares traded at Rs 196, TJ Lanka 2.9 million shares crossed for Rs 90.8 million; its shares traded at Rs 31, Citizens Development Business Finance 2.5 million shares crossed to the tune of Rs 80.2 million; its shares traded at Rs 32.50.

ACL Cables 634,248 shares crossed for Rs 60.9 million; its shares traded at Rs 96, CCS 438,000 shares crossed to the tune of Rs 57.4 million; its shares traded at Rs 131, Overseas Realties 991,500 shares crossed for Rs 49.6 million; its shares traded at Rs 50 and Access Engineering 653,000 shares crossed to the tune of Rs 49.3 million; its shares sold at Rs 75.50.

In the retail market companies that mainly contributed to the turnover were; Dialog Rs 133 million (3.2 million shares traded), Seylan Bank (Non-Voting) Rs 110 million (1.7 million shares traded), Colombo Dockyard Rs 96.8 million (751,548 shares traded), Ceylinco Holdings (Non-Voting) Rs 77.5 million (516,000 shares traded), Sampath Bank Rs 74.2 million (530,000 shares traded), JKH Rs 74 million (3.7 million shares traded) and LMF Rs 65 million (781,000 shares traded). During the day 123 million share volumes changed hands in 26272 transactions.

It is said that the manufacturing sector, especially Chevron Lubricants and several other firms performed well, while the banking and financial sector performed too.

Yesterday the rupee was quoted flat at Rs 334.50/335.50 to the US dollar in the spot market on, unchanged from the previous day’s close, dealers said, while bond yields were broadly steady.

The telegraphic transfer rate for Sri Lanka’s rupee against the US dollar was Rs 330.50 buying, Rs 339.50 selling; euro was Rs 381.1884 selling, Rs 395.1054 buying; and the pound Rs 442.6620 buying Rs 456.7076 selling.

A bond maturing on 01.08.2030 was quoted at 12.12/20 percent, down from 12.15.25 percent.

A bond maturing on 15.06.2034 was quoted at 13.12/20 percent, down from 13.15/25 percent.

A bond maturing on 15.03.2035 was quoted flat at 13.15/25 percent.

By Hiran H Senewiratne