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CBSL stresses need for all to remain focused until crisis resolution

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The Central Bank said yesterday it will remain committed to achieving its mandate through appropriate policy measures but reiterated the need for steadfast commitment by all to remaining in focus until the crisis is overcome through collective efforts in this crucial moment of Sri Lanka’s socioeconomic history.It said an efficient implementation of the identified near-term stabilisation measures and the medium to long term structural reforms both by the Central Bank and the Government is vital to position Sri Lanka on a fast track to recovery on a sustained basis.

Nevertheless, formulating macroeconomic policies and recovery strategies during a crisis is fraught with enormous uncertainties. This requires timely adjustments to policies and strategies as new information becomes available,” CBSL said in releasing its monetary and financial sector policies for 2023 and beyond.

Following is the full text of the CBSL statement.

Sri Lanka encountered the most challenging year in 2022 in the post-independence economy.

Headwinds due to consecutive economic shocks in recent years, including the Easter Sunday attacks in 2019, the outbreak of COVID-19 in 2020, and its protracted impact on activity in the aftermath in 2021, the socioeconomic and political crisis in 2022amidst catastrophic balance of payments (BOP) pressures, along with unprecedented policy tradeoffs, have severely affected economic activity, inflicting unimaginable hardships to individuals and businesses.

Livelihoods were lost, while real incomes suffered the most. Structural economic impediments that existed across various spheres of the economy over decades were compounded by these economic shocks, along with ill-timed policy choices, thereby loosening the macroeconomic balance and resulting in a sudden and multipronged setback for the nation.

The Government and the Central Bank were compelled to implement painful, but unavoidable policy measures during 2022 aimed at restoring macroeconomic balance.

Monetary policy was tightened by an unprecedented adjustment in interest rates to prevent inflationary pressures from worsening while arresting any adverse inflation expectations over the near to medium term. A temporary suspension of selected foreign debt was announced amidst the dire foreign exchange shortage while initiating measures to consolidate public debt with the envisaged support from an extended fund facility (EFF) arrangement from the International Monetary Fund (IMF).

Foreign exchange outflows, which were spared due to the suspension of certain debt servicing, helped make the immediately required operational space to contain the burgeoning BOP pressures, along with inflows of foreign exchange from friendly nations and multilateral sources. Foreign exchange outflows were further contained by several other measures,

including the prioritisation of imports. These measures ensured the availability of foreign exchange for essential imports, including fuel, coal, cooking gas, medicine, and food items, among others, thereby relieving socioeconomic unrest to a greater extent.

Meanwhile, exchange rate stability was restored by a consultation process with market participants, following a significant overshooting in early 2022. Further measures were initiated to improve foreign exchange liquidity in the domestic foreign exchange market with the repatriation and conversion requirements of foreign exchange, thereby disincentivising activity in the grey market.

Meanwhile, an array of measures was implemented to preserve stability in the financial system, thereby avoiding any far-reaching consequences on the entire socioeconomic structure. Further, the Government has embarked on long-overdue reforms to rectify structural deficiencies in fiscal operations, as well as other sectors of the economy, that are imperative in ensuring a sustained recovery of the economy.

In parallel with the implementation of near-term economic stabilisation measures, negotiations with the IMF for an EFF arrangement were initiated by the Government and a Staff Level Agreement was reached in September 2022.

Meanwhile, measures are underway to secure financing assurances from official creditors for the debt restructuring process aimed at ensuring medium term public debt sustainability. With significant progress being made at present in relation to the interaction with the Sri Lankan creditors, the envisaged IMF facility is expected to materialise in early 2023.

The near-term economic stabilisation measures implemented thus far are unprecedented. The sacrifice made by individuals and businesses during these difficult times would be meaningful only when economic stability is restored over the medium to long term.

Towards that end, collective and coordinated efforts are needed from all corners of society to ensure that the economy makes a sustainable recovery.

The outlook for the economy for 2023 and beyond and the major aspirations of the Monetary Board of the Central Bank for regaining macroeconomic stability are laid out below Inflation and economic growth

I. The rapid acceleration of inflation that began from early 2022, turned around in October 2022, supported by the tight monetary policy measures implemented to contain inflationary pressures, the fiscal consolidation efforts and supply side policies of the Government, along with the relative easing of price pressures globally, among others

II. Headline inflation is expected to move along a disinflationary path with a deceleration in the first half of 2023 and reaching the desired levels of inflation towards the end of 2023. If any upside risks to inflation emerge in the period ahead, that would be addressed through appropriate policy measures

III. Inflation expectations remain well anchored along the projected disinflation path

IV. The Sri Lankan economy, which is projected to register a real contraction of around 8% in 2022, is expected to record a gradual recovery from the second half of 2023 and sustain the growth momentum beyond

Monetary policy and interest rates

I. The monetary policy will remain focused on ensuring price stability over the medium term

II. The forthcoming Central Banking Act, of which the draft has already been approved by the Cabinet of Ministers, will further strengthen the independence and accountability of the Central Bank, thereby reinforcing its core objective of ensuring price stability within the flexible inflation targeting (FIT) framework

III. The Central Bank will start publishing a forward-looking Monetary Policy Report to better inform the public on the outlook of the economy, thereby further improving the transparency of monetary policy actions

IV. The excessively high levels of interest rates observed at present are expected to moderate in the period ahead as money market liquidity conditions improve and the risk premia attached to debt restructuring concerns assuage

V. As guided by the near-term inflation outlook, market interest rates could adjust downward, yet maintain reasonably tight monetary conditions until inflationary pressures are sufficiently contained

VI. The Central Bank has already requested the banking and non-banking sector institutions to avoid unhealthy competition for raising deposits by offering high rates of interest, which has led to excessive adjustments in all market interest rates, including the lending rates, well above the adjustment of policy interest rates. The market interest rate structure (of both deposit and lending interest rates) is expected to moderate in the period ahead with improving market liquidity conditions. If such adjustment would take longer time than anticipated, the Central Bank will consider taking administrative measures, as appropriate

VII. Further flexibility in the determination of the exchange rate will be restored in line with the medium to long-term equilibrium levels that help foster competitiveness

Financial sector

I. Ensuring financial system stability also remains at the forefront of the Central Bank’s reform and stabilisation plan

II. The Central Bank ensures liquidity support to fulfil cashflow requirements of banking institutions to enhance the resilience of the financial sector

III. The proposed Banking (Special Provisions) Act is expected to provide the required legal framework to ensure that the banks are adequately capitalised, and upgrade their resolution framework, safeguard the interests of depositors, and strengthen the regulatory powers of the Central Bank

IV. Existing regulations relating to capital and liquidity will be reviewed in order to preserve the capital and liquidity levels of the banking sector to withstand emerging risks. Moreover, the current regulation on single borrower exposure limits will also be reviewed to reduce the sovereign-bank nexus

V. Consolidation of financial institutions in both the banking and non-banking financial sectors will be carried out/facilitated to improve capital with the benefit of economies of scale, synergy, and efficiency, while enhancing the financial strength, resilience and overall stability of those entities and their ability to cater to the growing demands of the business community in the period ahead

VI. Amendments to the Finance Business Act No. 42 of 2011 and the Finance Leasing Act No. 56 of 2000 in line with the market developments will be introduced aiming at ensuring stability of the non-bank financial sector. Moreover, the proposed Microfinance and Credit Regulatory Authority Act will improve the market conduct and consumer protection of overall non-banking sector customers. Further, measures will be prioritised to bring the Licensed Micro-Finance Companies (LMFCs) and unregulated moneylenders under the regulatory purview

Foreign exchange management

I. Cross border and domestic foreign exchange transactions monitoring system (i.e., International Transactions Reporting System – ITRS) introduced in 2022 will be further optimised to enhance data coverage in the external sector, improve regulatory monitoring and support informed decision making

II. The demand management measures imposed on curtailing certain imports will be assessed vis-à-vis the foreign exchange liquidity and monetary conditions

An efficient implementation of the identified near-term stabilisation measures and the medium to long term structural reforms both by the Central Bank and the Government is vital to position Sri Lanka on a fast track to recovery on a sustained basis.

Nevertheless, formulating macroeconomic policies and recovery strategies during a crisis is fraught with enormous uncertainties. This requires timely adjustments to policies and strategies as new information becomes available.

The Central Bank will remain committed to achieving its mandate through appropriate policy measures while closely observing developments to take corrective policy and regulatory measures. The Central Bank appreciates the unwavering support, cooperation, and sacrifice of the financial sector participants, the business community, and the public at this crucial moment of Sri Lanka’s socioeconomic history, and reiterates the need for steadfast commitment to remaining in focus until the crisis is overcome through collective efforts.



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Jaffna Teaching Hospital secures lifeline water supply via ADB-funded Thalaiyadi sea water desalination plant

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The project represents a major financial investment coupled with rigorous environmental management to protect the surrounding coastal ecosystem

It marks Sri Lanka’s first-ever large-scale SWRO desalination plant

By Sanath Nanayakkare

The Asian Development Bank (ADB)-funded sea water reverse osmosis (SWRO) desalination plant in Thalaiyadi has delivered a crucial operational boost to the Jaffna Teaching Hospital, securing a reliable supply of purified, low-calcium water for critical medical care and specialized equipment.

Speaking during a site briefing with ADB officials headed by Country Director Shannon Cowlin, National Water Supply and Drainage Board engineers, and media representatives, Hospital Director Dr. T. Sathiyamoorthy confirmed that a dedicated supply line from the plant was successfully connected earlier this year following three years of planning and requests.

With a 175-year legacy of excellence, this 1,550-bed facility serves as the premier healthcare institution in the Northern Province. Currently providing specialized services—including neurosurgery, open-heart surgery, kidney transplants, and bone marrow transplants—the hospital is positioning itself for elevation to National Hospital status under Ministry of Health guidelines.

Operating across a sprawling 13.5-acre compound, the institution functions much like a self-contained township, managing a massive daily footfall that underscores its role as a vital regional lifeline. The hospital accommodates over 1,500 in-patients on any given day, while its outpatient services face a relentless stream of visitors. Daily arrivals typically include 900 to 1,000 OPD patients, accompanied by up to 2,800 clinic visitors distributed across more than 30 specialized medical and surgical units.

When factoring in the wider operational ecosystem, the total daily population within the compound swells to approximately 10,000 people. This high-volume environment is sustained by a dedicated workforce of 2,400 healthcare professionals, alongside a daily influx of over 3,000 visiting relatives who pass through the facility to support recovering patients.

The Thalaiyadi seawater desalination plant

For decades, the hospital’s reliance on local groundwater presented severe operational bottlenecks. Jaffna’s limestone-heavy geology yields water with high calcium concentrations, causing severe mineral build-up that damaged millions of rupees worth of high-value equipment ranging from large-scale sterilizers to delicate endoscopic instruments.

The introduction of low-calcium desalinated water has immediately safeguarded key operational areas. The initial phase of the connection delivers purified water directly to high-priority sections, including operating theaters, intensive care units (ICUs), and main entrance public drinking facilities.

While the hospital’s total assessed daily demand stands at 1,500 cubic meters, desalinated water currently covers approximately 30% of total usage. The remaining 70% continues to depend on legacy systems due to internal piping networks that are nearly 60 years old. To resolve this, hospital management has floated tenders to overhaul internal distribution lines, enabling pure desalinated water to reach all wards.

Jaffna Teaching Hospital Director Dr. T. Sathiyamoorthy and ADB Country Director Shannon Cowlin during a meeting at the hospital premises

Engineers confirmed that the SWRO plant operates with a capacity of 24,000 cubic meters per day, guaranteeing ample volume for full hospital coverage. Furthermore, the ADB is structuring a new municipal wastewater treatment project for Jaffna, which will integrate the hospital and replace its aging internal waste treatment system.

Dr. T. Sathiyamoorthy stressed that clean piped water is vital to public health in Jaffna, where groundwater remains vulnerable to agricultural fertilizer runoff, commercial effluents, and historical pollution concerns such as the Chunnakam oil contamination incident. He noted that encouraging piped water consumption also reduces dependence on single-use bottled water, which risks microplastic degradation when exposed to the region’s intense heat.

The Thalaiyadi seawater desalination plant represents a major financial investment coupled with rigorous environmental management to protect the surrounding coastal ecosystem. Financially, the project carries a total capital cost of USD 55 million, anchored by a primary contract valued at LKR 14,559 million—structured across multiple currencies including USD 49 million, EUR 15 million, and INR 314 million, alongside local allocations.

Awarded to M/s Suez International under a comprehensive Design, Build, and 7-Year Operation framework, the project involves an operational expenditure of USD 0.55 per cubic meter, with management scheduled to transfer to the National Water Supply and Drainage Board (NWSDB) following the completion of the operational term in October 2031.

Simultaneously, extensive ecological safeguards have been integrated into the facility’s design to mitigate marine disruption. The offshore intake system is positioned away from sensitive habitats and utilizes low-velocity grilles to prevent fish entrainment, safeguarding the interests of the local fishing community. Furthermore, waste discharge is strictly regulated under Central Environmental Authority (CEA) and Marine Environment Protection Authority (MEPA) guidelines. Brine concentrate is sent through an offshore outfall equipped with specialized diffusers located more than 500 meters from the shore, ensuring rapid dispersion and limiting salinity impact to a tightly controlled 50-meter mixing zone.

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Sri Lanka opens up: A new season of direct connectivity

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Malik J. Fernando, Chair, Tourism allianCe

For as long as we can remember, flying to Sri Lanka has meant relying on a handful of options — SriLankan Airlines direct services, useful but limited in schedule and market coverage, or a stop in Dubai, Doha, or Abu Dhabi. That is beginning to change, and this winter season marks one of the more significant shifts in our aviation connectivity.

A wave of carriers is launching direct services into Colombo and it is worth taking stock of what that means for the industry — not just as a matter of flight schedules, but as a matter of strategy.

Europe, reconnecting

British Airways returns to Colombo on 23 October, restoring a non-stop link to London Gatwick. The UK remains one of our strongest, most loyal source markets, and a direct flight removes a genuine point of friction.

Edelweiss Air, part of the Lufthansa Group, is increasing its Zurich service to three times weekly from 26 October — a route that brings with it high-spending Swiss and DACH-region traveller our wellness and upscale properties need.

And in December, French Bee launches a new seasonal service from Paris, opening a cost-conscious but committed segment of the French long-haul market.

A first for Vietnam

A notable development is the arrival of two Vietnamese carriers — Vietnam Airlines and VietJet — both launching direct Ho Chi Minh City services. This is the first time Sri Lanka has a direct link to Vietnam, and it opens a corridor of travellers who may come to see Sri Lanka and Southeast Asia as a natural pairing. Beijing Capital Airlines and Batik Air are expected to add further capacity later in the season, strengthening our reach into China and Malaysia.

The Vietnam route connects us to more than tourists. Vietnam is drawing strong foreign investment and has established itself as a major manufacturing and export hub. A direct Colombo–Ho Chi Minh City link gives us an easier way to engage with that — not only holidaymakers, but business travellers, investors, and trade delegations.

Australia, and the low-cost gap it fills

SriLankan Airlines flies non-stop to Melbourne and Sydney, so Jetstar isn’t opening a new corridor — it’s opening a new price point, the first low-cost carrier to fly non-stop between Melbourne and Colombo, operating three times weekly, year-round, on its Boeing 787 Dreamliner fleet, adding over 100,000 seats a year.

More than “budget”: what these new entrants actually offer

It is worth being precise about what these new services bring, because labels like “low-cost” and “seasonal” can undersell the product. Several of the low-cost and long-haul entrants in this line-up — Jetstar, VietJet, French bee among them — offer proper business-class or premium-economy-style cabins, not a basic recline seat, and all of them are flying modern, widebody aircraft.

Just as important is brand familiarity. Jetstar is a household name across Australia, French Bee It’s trusted by French travellers, and British Airways needs no introduction. Recognisable, trusted brands lower the barrier to trying a new destination. And on the loyalty side, travellers on nearly every one of these routes can redeem frequent flyer points which is a genuine draw for the kind of higher-value, repeat visitor we want more of.

The new carriers market Sri Lanka in its home country with sophistication and reach — glossy campaigns, in-flight promotion, and placement across a crowded travel marketplace reaching the audience we most want to reach.

Why this matters beyond the season

For years, the majority of our long-haul arrivals have transited through the Middle East. That has served us well, but it has also meant a meaningful share of our connectivity has depended on a region that has had its share of instability.

Direct flights change that picture. They cut travel time, appeal to time-conscious, high-value holidaymakers, and, importantly, they diversify our routes to market. This is not a case against our Gulf carrier partners, who remain vital to our connectivity. It is simply a recognition that resilience comes from diversity.

What it means for the season ahead

Securing these routes is only half the job. It now falls to us, as an industry, to support the flights — through targeted destination marketing in each of these new source markets, so that load factors and yields justify the investment these airlines have made in Sri Lanka. Several of these services are seasonal, and our task is not simply to see them through a single winter, but to build the demand that gives an airline the confidence to extend a route year-round. We should not lose sight of the fact that Sri Lanka does not have an off-season — we are a year-round destination and our marketing should say so. Getting this right is as much our responsibility as it is the airlines’.

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‘Biodiversity imparting a powerful competitive advantage to SL’s businesses’

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By Ifham Nizam

Biodiversity is rapidly moving beyond the traditional boundaries of conservation to become an increasingly important economic and business issue, with Sri Lankan companies being urged to recognise nature not simply as an environmental responsibility but as an asset capable of influencing competitiveness, investment and access to international markets.

This was among the key messages at the opening plenary of the 11th Annual Technical Sessions of Biodiversity Sri Lanka (BSL), held on Tuesday at the Shangri-La Colombo under the theme “Beyond Borders: Partnering for Business to Prosper with Nature.”

The panel brought together leading figures from economics, business and biodiversity, including Dr. Nishan de Mel, Founder and Executive Director of Verité Research; Dr. Ruchira Somaweera, National Technical Executive (Ecology), WSP Australia and Adjunct Professor at Murdoch University; Siddarth Hirdaramani, Director, Hirdaramani Group and Director, Biodiversity Sri Lanka; and Shiranee Yasaratne, Senior Technical Advisor, Biodiversity Sri Lanka.

The discussion placed particular emphasis on the growing role of biodiversity science in business decision-making, with Dr. Ruchira Somaweera bringing an important scientific perspective to the question of how companies—large and small—should respond to the rapidly changing global biodiversity agenda.

Somaweera, a wildlife biologist with extensive international experience in scientific research, environmental consultancy and biodiversity conservation, currently provides expert advice on biodiversity conservation and environmental management through his work in Australia. He is also an Adjunct Professor at Murdoch University and contributes to international scientific and conservation initiatives.

His participation in the panel underscored an increasingly important reality for business: biodiversity cannot be addressed only through isolated conservation projects, but needs to be understood in terms of how companies interact with ecosystems, supply chains and natural resources.

Opening the discussion, Dr. Nishan de Mel said he had been invited to step outside his familiar field of economics and examine biodiversity from an economist’s perspective.

Drawing a parallel with biodiversity, de Mel said economists had traditionally developed sophisticated ways of measuring inflation, productivity, employment and economic growth, but had failed to adequately measure the natural systems on which economic activity depends.

“The single largest input into the world economy, the one without which no one can get anything done, appears not to get measured at all by economists, he said.

That missing element, he noted, was nature.

De Mel referred to research by the World Economic Forum and PwC which examined the dependence of 163 industries and their supply chains on nature and biodiversity. He said the research estimated that economic activities moderately or highly dependent on nature represented an enormous share of global economic output.

The significance of those figures, he stressed, was not that nature could simply be assigned a monetary value equivalent to global GDP. Rather, they represented the exposure of the global economy to the degradation of natural systems.

The concept of risk extending beyond the traditional boundaries of a company’s balance sheet was particularly relevant to the theme of the forum, “Beyond Borders”.

For Dr. Ruchira Somaweera, the scientific dimensions of that relationship between business and biodiversity are increasingly difficult for companies to ignore.

The panel’s decision to bring a leading wildlife biologist into a discussion dominated by business and economics reflected the changing nature of the biodiversity debate itself. Biodiversity is no longer being discussed solely as a matter for conservationists, wildlife specialists or environmental organisations.

Businesses are increasingly being asked to understand what ecosystems provide, how their operations affect those systems and what risks arise when biodiversity is degraded.

The moderator specifically turned to Somaweera after hearing how major international companies and buyers were increasingly concerned about environmental performance.

He raised the question of whether the business advantages of biodiversity were confined to large corporations dealing with sophisticated international buyers, or whether small companies and firms should also be taking biodiversity seriously.

The scientific perspective offered by Somaweera is therefore critical to ensuring that biodiversity is not reduced merely to a corporate branding exercise.

Earlier, Yasaratne explained how the business community’s approach to biodiversity had changed considerably over the past 11 years.

She recalled that when the platform was established, businesses were still trying to understand how they could engage with biodiversity and ecosystem issues.

‘At that time there was more philanthropic activity for biodiversity, she said, referring to popular initiatives such as tree-planting campaigns.

The emphasis, however, has increasingly shifted towards understanding the science behind biodiversity and the business implications of ecosystem degradation.

From the business perspective, Hirdaramani said Sri Lanka’s biodiversity and environmental credentials could provide a genuine competitive advantage.

He used the apparel industry to illustrate the point.

Sri Lanka cannot compete with countries such as Bangladesh, India, Vietnam and China purely on the basis of low production costs or manufacturing scale, he said. Labour costs are higher, the country’s manufacturing base is smaller and Sri Lanka does not possess the extensive domestic supply chains available in some larger manufacturing economies.

“What we do have is a very positive biodiversity environment,” Hirdaramani said.

He argued that Sri Lanka’s environmental credentials, together with its strong labour standards and social compliance, had helped create a reputation as a responsible manufacturing destination.

Hirdaramani said this could translate directly into business opportunities, particularly when competing for customers who are prepared to pay a premium for responsible production.

The discussion also highlighted another fundamental economic problem: natural capital is often depleted without being properly reflected in conventional measures of economic performance.

De Mel referred to the work of economist Professor Sir Partha Dasgupta, whose landmark review for the UK Treasury reframed the environmental challenge as an issue of asset depletion rather than merely pollution.

He argued that countries routinely account for the depreciation of physical infrastructure and machinery, but national accounts generally fail to properly reflect the depletion of forests, fisheries, watersheds and other natural assets.

The message emerging from the BSL panel was therefore that biodiversity must increasingly be incorporated into the way businesses understand risk, competitiveness and long-term value.

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