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CB eases monetary conditions by reducing its interest rates

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The Monetary Board of the Central Bank has decided to reduce the Standing Deposit Facility Rate and the Standing Lending Facility Rate by 200 basis points to 11.00 percent and 12.00 percent respectively.The Central Bank said it took this decision at the monetary board meeting conducted on Wednesday.

The board arrived at this decision following a careful analysis of the current and expected developments, including the faster-than-envisaged disinflation process and benign inflation expectations in the domestic economy, with the aim of enabling the economy to reach its potential and stabilizing inflation at mid-single-digit levels in the medium term, while easing pressures in the financial markets, the Central Bank statement said.

The board expects that with this reduction of policy interest rates by 200 basis points, and the reduction of policy interest rates by 250 basis points in early June 2023, along with the significant reduction of risk premia on government securities witnessed recently, the market interest rates, particularly lending rates, will adjust downwards adequately and swiftly, said the central bank.

Therefore, the banking and financial sector is urged to pass on the benefits of this significant easing of monetary policy by the central bank to individuals and businesses, thereby supporting economic activity to rebound in the period, the statement said.

The CBSL said Colombo Consumer Price Index (CCPI) (2021=100) based headline inflation (year-on-year) decelerated further in June 2023 to 12.0 per cent, reflecting easing price pressures across many categories, including energy and food prices, along with the favourable base effect.

CCPI based food inflation (year-on-year) and core inflation (year-on-year), which reflects underlying inflation, moderated to single digit levels in June 2023, reinforcing the disinflation process. The full pass through of the appreciation of the Sri Lanka rupee against the US dollar thus far in 2023 is yet to be reflected in the price levels, a factor that could further support the disinflation process.

As per the latest projections of the Central Bank, headline inflation is expected to decelerate further and reach single digit levels by early Q3-2023 and stabilise around mid-single digit levels over the medium term, the CBSL said.

The ongoing disinflation process is supported by the lagged impact of tight monetary and fiscal policies, the expected softening of energy and food prices and their spillover effects, and possible repricing of goods and services due to exchange rate appreciation, alongside the favourable impact of the statistical base effect, CBSL said.

CBSL added that domestic economic activity is expected to recover gradually towards late 2023 and sustain the recovery, thereby helping to reach the potential level of economic growth over the medium term.

As per the GDP estimates published by the Department of Census and Statistics (DCS), the real economy contracted in Q1-2023, driven by a substantial contraction in Manufacturing and Services sectors. According to the leading indicators, economic activity is estimated to have remained subdued in Q2-2023 as well, reflecting the protracted impact of the economic distress in 2022 coupled with the tighter monetary and fiscal policies implemented to bring in greater macroeconomic stability.

However, the economy is projected to recover gradually towards late 2023, supported by policy normalisation led by the easing of monetary conditions, improvements in supply conditions supported by strengthened foreign exchange liquidity, the gradual relaxation of import restrictions, enhancement in business and investor sentiment, and the impact of policy measures and structural reforms being implemented to promote economic growth.

This recovery is expected to sustain, thereby gradually closing the large negative output gap that exists in the economy and reaching the potential level of economic growth over the medium term.



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No change in death toll, stands at 639 as at 0600AM today [11th]

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The Situation Report issued by the Disaster Management Center at 0600 AM today [11th December 2025] confirms that there has been no addition to the death toll in the past 24 hours and remains at 639. The number of missing persons has reduced by ten [10] and stands at 193.

There is a slight reduction in the  number of persons who are at safety centers and, stands at 85,351  down from 86,040 yesterday.  Five safety centers have also closed down in the past 24 hours and  873 safety centers are still being maintained.

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Regulatory rollback tailored for “politically backed megaprojects”— Environmentalists

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Investigations have revealed that the government’s controversial easing of environmental regulations appears closely aligned with the interests of a small but powerful coalition of politically connected investors, environmentalists have alleged.

The move weakens key Environmental Impact Assessment (EIA) requirements and accelerates approvals for high-risk projects, has triggered a storm of criticism from environmental scientists, civil society groups and even sections within the administration, they have claimed.

Environmental Scientist Hemantha Withanage, Executive Director of the Centre for Environmental Justice, told The Island that the policy reversal “bears the fingerprints of elite political financiers who view Sri Lanka’s natural assets as commodities to be carved up for profit.”

“This is not accidental. This is deliberate restructuring to favour a specific group of power brokers,” he told The Island. “The list of beneficiaries is clear: large-scale mineral extraction interests, luxury hotel developers targeting protected coastlines, politically backed hydropower operators, industrial agriculture companies seeking forest land, and quarry operators with direct political patronage.”

Information gathered through government insiders points to four clusters of projects that stand to gain substantially:

Several politically shielded operators have been lobbying for years to weaken environmental checks on silica sand mining, gem pit expansions, dolomite extraction and rock quarrying in the central and northwestern regions.

High-end tourism ventures — especially in coastal and wetland buffer zones — have repeatedly clashed with community opposition and EIA conditions. The rollback clears obstacles previously raised by environmental officers.

At least half a dozen mini-hydro proposals in protected catchments have stalled due to community objections and ecological concerns. The new rules are expected to greenlight them.

Plantation and agribusiness companies with political links are seeking access to forest-adjacent lands, especially in the North Central and Uva Provinces.

“These sectors have been pushing aggressively for deregulation,” a senior Ministry source confirmed. “Now they’ve got exactly what they wanted.”

Internal rifts within the Environment Ministry are widening. Several senior officers told The Island they were instructed not to “delay or complicate” approvals for projects endorsed by select political figures.

A senior officer, requesting anonymity, said:

“This is not policymaking — it’s political engineering. Officers who raise scientific concerns are sidelined.”

Another added:”There are files we cannot even question. The directive is clear: expedite.”

Opposition parliamentarians are preparing to demand a special parliamentary probe into what they call “environmental state capture” — the takeover of regulatory functions by those with political and financial leverage.

“This is governance for the few, not the many,” an Opposition MP told The Island. “The rollback benefits the government’s inner circle and their funders. The public gets the consequences: floods, landslides, water scarcity.”

Withanage issued a stark warning:

“When rivers dry up, when villages are buried in landslides, when wetlands vanish, these will not be natural disasters. These will be political crimes — caused by decisions made today under pressure from financiers.”

He said CEJ was already preparing legal and public campaigns to challenge the changes.

“We will expose the networks behind these decisions. We will not allow Sri Lanka’s environment to be traded for political loyalty.”

Civil society organisations, environmental lawyers and grassroots communities are mobilising for a nationwide protest and legal response. Several cases are expected to be filed in the coming weeks.

“This is only the beginning,” Withanage said firmly. “The fight to protect Sri Lanka’s environment is now a fight against political capture itself.”

By Ifham Nizam

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UK pledges £1 mn in aid for Ditwah victims

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Acting UK High Commissioner Theresa O’Mahony inspecting a school damaged by floods, during a visit to the Sri Lanka Red Cross operations in Gampaha.

The UK has pledged £1 million (around $1.3 million) in aid to support victims of Cyclone Ditwah, following Acting High Commissioner Theresa O’Mahony’s visit to Sri Lanka Red Cross operations in Gampaha.

“This funding will help deliver emergency supplies and life-saving assistance to those who need it most,” the British High Commission said. The aid will be distributed through humanitarian partners.

During her visit, O’Mahony toured the Red Cross warehouse where UK relief supplies are being prepared, met volunteers coordinating relief efforts, and visited flood-affected areas to speak with families impacted by the cyclone.

“Our support is about helping people get back on their feet—safely and with dignity,” she said, adding that the UK stands “shoulder to shoulder with the people of Sri Lanka” and will continue collaborating with the government, the Red Cross, the UN, and local partners in recovery efforts.

She was accompanied by John Entwhistle, IFRC Head of South Asia, and Mahesh Gunasekara, Secretary General of the Sri Lanka Red Cross.

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