Business

CB Governor confident inflation will fall to single digit by end of 2023

Published

3 years ago

2023/02/27

Thilina Walpola

Sri Lanka eyes IMF first tranche in March 2023

Last year’s economic contraction expected to be around 7.5%- 8.0%

This year expected to see stability without a contraction

Sequencing of policy action to be continued

By Sanath Nanayakkare

I clearly see that by the end of the year, inflation will fall to single digit, and I can say that with confidence as the Governor of the Central Bank, Dr. Nandalal Weerasinghe said during an interview recently.

“At the time the IMF staff and the Sri Lankan authorities reached a staff-level agreement in September 2022 to support Sri Lanka under an Extended Fund Facility (EFF) of about US$ 2.9 billion, their forecast was Sri Lanka’s inflation would exceed 70% by December 2022. Many people thought inflation would increase by 100%. In fact, food inflation soared to 95%. But having noted the higher than expected escalation of headline inflation and the increased persistence of high inflation, we increased interest rates to contain it. Now inflation has been trending down steadily since September 2022. I clearly see that by the end of the year, inflation will decline to single digit,” he said.

When he was told that some people accuse him for the economic contraction triggered by high interest rates, he replied,” When economic contraction takes place, it hurts everyone. Trade volumes decline, industrial outputs decline and the impacts are felt at all levels. However, for the country to get out of the economic crisis, painful measures needed to be taken which could lead to economic contraction, but that’s the only way out to stabilize the economy. If there hadn’t been an economic crisis, there would have been no need for contracting the economy. Imagine what would have happened if we hadn’t increased interest rates. Interest rate is a tool we use to contain high inflation,” he said.

“Businesses suffer mainly because of high inflation that has a direct impact on their cost of production. When upward inflation is controlled, the cost of production can be controlled and the businesses can operate well with consumers’ purchasing power intact. Inflation is the main enemy of any economy. So tackling inflation is our main responsibility and that’s what we have done. When inflation goes down, interest rates will also go down. And also when the uncertainty in the market abates, interest rates will go down. It is not logical to assume that interest rates will remain at the same level for ever. We controlled the inflation by increasing interest rates. It was like systematically preventing the blowing up of a highly inflated balloon. If it hadn’t been done, the economy would have been in smithereens. Talks with the IMF, debt sustainability, increasing interest rates, balancing of monetary expansion should have been done when the circumstances demanded to do so. If those actions had been taken at the correct time, inflation wouldn’t have been this high. But now there is no other way to get out of the situation we are in, “he said.

Asked whether he hoped the first tranche of the IMF would be released soon, he said,” We strongly hope that we will get the IMF facility’s first tranche in March, 2023. And when we get that, it will instill the confidence of multilateral bodies such as the World Bank and ADB in our financial discipline to give us loans at concessionary rates. They have already agreed to do so. In addition to that, there will be more foreign inflows to our equity market and foreign investment portfolio. These will ease our balance of payment issue, help lower our interest rates and rationalize our exchange rate. Then the 3-month T-Bill yield rate which is still high will move in line with Central Bank’s policy rates.

With the realization of the IMF facility, uncertainty-driven market interest rates will dissipate and will come down to normal levels. This can’t still happen because risk-free government security rates are still at 30% – though down from its previous 33%. Prime lending rates are still affected by this. Many have complained to me that interest rates are too high, and therefore, it’s difficult to do business and they find it very difficult to repay their loans. That is true. The reason for this situation is the lack of foreign currency.

So when we have more foreign currency, interest rates can be lowered without affecting our foreign reserves, while keeping our imports under control. We can’t go back to a chaotic situation like in June 2022. Last year could have seen an economic contraction of 7.5- 8.0%. This year we need to stabilize the economy and achieve stable performance in all four quarters. This has to be done very carefully with proper sequencing so that all sectors can operate smoothly. Although the situation appears to be normal on the facade, it is still not so. There is still a deficit. That’s why the constant sequencing of our policy action is crucial,” the Governor said.

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Business

ADB announces financial support package to help Asia and Pacific

Published

22 hours ago

2026/03/27

Thilina Walpola

The Asian Development Bank (ADB) has announced a financial support package to help its developing member countries (DMCs) mitigate the economic and financial impacts resulting from the conflict in the Middle East.

“ADB will deliver rapid, flexible, and scalable assistance to help countries manage immediate pressures and strengthen long-term resilience, notably fast-disbursing budget support and trade and supply chain finance to secure the import of essential goods, now including oil,” said ADB President Masato Kanda. “This builds on our strong track record of supporting Asia and the Pacific through periods of global uncertainty.”

ADB has ample resources to safeguard existing and planned operations, while expanding emergency support in line with DMC needs, including utilizing its countercyclical lending buffer.

The bank is closely monitoring global market developments and their potential implications for economies across Asia and the Pacific, particularly regarding energy price volatility, inflationary pressures, and external account balances.

The latest ADB analysis indicates that disruptions to shipping routes have already increased costs and delivery times, while supply risks extend beyond energy to key industrial inputs such as petrochemicals and fertilizers, with serious implications for agriculture and food production. Tourism- and remittance-dependent economies face compounding vulnerabilities beyond these initial shocks. Furthermore, the conflict is increasing uncertainty and tightening financial conditions across the region, putting pressure on currencies and capital flows.

In response, ADB is ready to deploy timely financial and technical support to help DMCs manage risks, maintain macroeconomic stability, and protect vulnerable populations. There are two main components to ADB’s intervention. The first is fast-disbursing budget support to help DMCs facing heightened fiscal pressures, notably the use of the bank’s Countercyclical Support Facility to help governments stabilize their economies and mitigate the impact of shocks on the lives and livelihoods of those most at risk.

The second is ADB’s Trade and Supply Chain Finance Program (TSCFP), which supports the private sector to ensure critical imports, including energy and food, continue to flow. The bank has decided to reactivate support for oil imports under the program on an exceptional basis for this limited period. This decision acknowledges that economies and people across the region are being severely affected by the rapid surge in oil prices and supply chain disruptions.

ADB has begun discussions with all severely affected DMCs on possible immediate support and will continue to work closely with governments, development partners, and the private sector to ensure coordinated and effective responses to maintain economic stability and protect the poor and most vulnerable.

ADB is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—50 from the region.

Business

Global GIS celebrates 12th anniversary with grand opening of new office building

Published

22 hours ago

2026/03/27

Thilina Walpola

Jeewan Suranga, Director (L), and Nishshanka De Silva, Managing Director of Global GIS (Pvt) Ltd (R), opening the new head office

Global GIS (Pvt) Ltd, the pioneer of geospatial positioning solutions in Sri Lanka, celebrated its 12th year of successful operations with the grand opening of its new spacious 3-story head office building at 6th Lane, Pagoda Road, Nugegoda. The grand opening was followed by a series of religious events held at the new premises.

“As the pioneer in geospatial solutions in Sri Lanka, we are delighted to be celebrating this significant milestone in our journey by relocating to a more spacious premises warranted by the growth that we have been experiencing over the years. Furthermore, we have designed the new head office premises to add more value to our customers in terms of training, capacity building, and product demonstrations with a state-of-the-art auditorium,” stated Nishshanka De Silva, Registered Licensed Surveyor, Managing Director – Global GIS (Pvt) Ltd.

“This milestone serves as a testament to our dedication to innovation, leadership, and excellence. With our experience, our team of dedicated staff, and with the support of our long-standing partners, we are committed to providing our expertise in line with international best practices in the geospatial services industry,” he added.

“Global GIS operates a high-precision CORS (Continuously Operating Reference Stations) network that covers Sri Lanka, with strategically positioned GPS/GNSS receivers providing users with high-accuracy positioning data in real time”.

Business

NPCI International strengthens UPI Merchant Acceptance in Sri Lanka

Published

22 hours ago

2026/03/27

Thilina Walpola

Ritesh Shukla

For merchants:UPI provides access to a large, digitally savvy customer base, improves cash management, reduces dependence on physical currency and enhances operational efficiency

For travellers:UPI offers the convenience of real-time payments, transparent exchange rates, and a familiar, secure payment experience

NPCI International Payments Limited (NIPL), the international arm of the National Payments Corporation of India (NPCI), has reaffirmed its commitment to expanding Unified Payments Interface (UPI) merchant acceptance in Sri Lanka. The initiative aims to enhance cross-border payment experiences for Indian tourists, support Sri Lanka’s growing digital economy, and further strengthen the deep economic and cultural ties between India and Sri Lanka.

UPI, India’s real-time, account-to-account payment system, enables instant and secure transactions through mobile applications. Processing over 20 billion financial transactions monthly, it has emerged as one of the world’s most advanced digital payment infrastructures. With over 700 million UPI QR- touch points across India, its open, interoperable architecture and strong security framework allows it to integrate seamlessly with international payment ecosystems, including Sri Lanka’s LankaQR infrastructure.

India has consistently remained Sri Lanka’s leading source for tourism. Over 4,16,000 Indian tourists visited the island in 2024, and this number grew to 5,31,000 in 2025, accounting for the highest share of total international arrivals. With this year-on-year growth, the need for seamless and reliable payment solutions has become even more crucial. Indian visitors travel to Sri Lanka for leisure, weddings, shopping, and spiritual tourism, highlighting the importance of smooth, secure, and convenient payment options throughout their journey.

Through the collaboration between NPCI International and LankaPay, Indian tourists can make digital payments across Sri Lanka by simply scanning LankaQR using their preferred UPI-enabled mobile applications, minimising the need to carry or exchange physical cash. UPI payments are now enabled at leading establishments including Cinnamon Hotels, Taj Hotels, Barista, Keells Supermarket and Odel, amongst others.To support this growing corridor, NIPL has been actively engaging with key stakeholders in Sri Lanka, including the Central Bank of Sri Lanka, acquiring banks, and key merchants, to scale UPI acceptance in line with Sri Lanka’s domestic payment framework.

This integration has significant advantages for both merchants and customers. For travellers, UPI offers the convenience of real-time payments directly from their Indian bank accounts, transparent exchange rates, and a familiar, secure payment experience. For Sri Lankan merchants, it provides access to a large, digitally savvy customer base, improved cash management, and reduced reliance on physical currency, driving greater operational efficiency.

Ritesh Shukla, MD & CEO, NPCI International, said, “NPCI International is committed to building trusted, interoperable payment corridors that bring countries closer through technology. Our engagement in Sri Lanka reflects a shared vision to enhance digital payment acceptance, simplify travel and commerce for millions of people, and create value for local businesses and the wider economy. Through our partnership with LankaPay, we are advancing seamless, secure, and real-time transactions that strengthens the economic partnership between India and Sri Lanka.”

As UPI adoption progresses, NIPL will continue working closely with Sri Lankan regulators, ecosystem players, and merchants to extend acceptance across high-frequency sectors such as hospitality, retail, tourism, and essential services. Recognized by the IMF as the world’s largest real-time payment system, powering 49% of global instant payments, UPI presents a significant opportunity for Sri Lankan merchant to elevate the travel experience for Indian visitors, boosting economic activity and enhancing cross-border commerce between the two nations.