Business

COVID-19 and the Sri Lankan economy: Policy choices and trade-offs

Published

4 years ago

2021/10/16

By Chathurrdhika Yogarajah

Sri Lanka’s macro-economic outlook amidst the COVID-19 pandemic came under the spotlight at a webinar panel discussion held on October 11, to mark the release of IPS’ flagship report, ‘Sri Lanka: State of the Economy 2021’. The event featured presentations by Dr Dushni Weerakoon and Dr Asanka Wijesinghe from IPS with expert insights from Dr Missaka Warusawitharana, Financial Economist, Johns Hopkins University, USA. Tharindu Udayanga from IPS moderated the discussion.

Prospects and Possibilities Dr Dushni Weerakoon, Executive Director, IPS

A V-shaped recovery is likely to take shape, but Sri Lanka faces a relatively weak output growth. A critical challenge is to lift the growth rate to, at least, 5-6% and maintain that momentum in the medium term. How investments perform will be a crucial determinant, as the dip in investment was a major driver of output contraction in 2020. With little fiscal space, Sri Lanka relied mostly on monetary policy. There was a surge in direct financing of fiscal spending, and there were efforts to ensure that borrowing costs were kept low via yield-control measures.

Sri Lanka is not so fortunately placed when considering the risks related to large-scale debt monetisation programmes due to high debt levels, elevated exposure to foreign debt with repayments of sizeable amounts in the medium term, and the low reserve stockpiles. With such weak fundamentals, the backbone of debt monetisation programmes is policy credibility. But for the last 18 months, there has been no notable effort to curtail discretionary spending and anchor fiscal plans. Thus, Sri Lanka is reluctant to deal with IMF conditionalities.

Policy measures must address fiscal imbalances through cuts in national spending or raising national income. As the latter takes time, the governments tend to focus on a policy mix to cut national spending that includes tighter budgets allowing interest rates to move with market fundamentals and implementing more flexible exchange rates. The downside is that the growth suffers in the short term with worsening debt ratios. These are politically difficult choices when economic conditions are tight as they are now.

Sri Lanka must firm up its access to foreign capital markets to balance the risks. If Sri Lanka comes to an adjustment on the fiscal front and improves access to capital markets, this will free up the space for a more orderly macroeconomic adjustment. Though the exchange rate may initially overshoot, it can be stabilised over time. This will allow the Central Bank to reverse its debt monetisation and focus on price stability, as that will be an area of concern in the coming months. A policy framework along these lines will provide a more robust environment to support investment and sustain Sri Lanka’s recovery.

Opportunities and Costs Dr Asanka Wijesinghe, Research Economist, IPS

During the pre-pandemic period, there was stabilisation in the rate of globalisation, but Sri Lanka’s openness has continuously declined especially after 2005 due to GDP growth in nontradeable sectors. However, Bangladesh, India, and South Asia, in general, show an increasing trend of openness. COVID-19 led to a deep plunge in the world’s industrial production and trade in 2019. But even after this collapse, it recovered by the beginning of 2021. There is no evidence to show deglobalisation effects due to the pandemic.

When the world trade outlook is taken into consideration, the WTO predicts a pickup in global trade volumes for the year 2022. An IMF database that uses signals emitted by sea vessels also showed an uptick in world trade from the beginning of 2021. Sri Lanka should ready itself to take advantage of trade diversion and investments opportunities the tariffs imposed on China’s textiles by the US, for instance. At present, its global value chain (GVC) participation is low and in fact declined from 2009 to 2019. In contrast countries like Bangladesh, Viet Nam, India and Pakistan showed an increasing trend. He pointed out that the US-China trade war presents opportunities for Sri Lanka to increase both forward and backward GVC participation.

A key challenge is the costly policy of import substitution, resulting in resource misallocation, reduced competitiveness, and possible retaliation from trade partners. Another challenge for Sri Lanka is the potential withdrawal of GSP+ which will be a hard hit on the seafood and textile industries. Sri Lanka should work to secure GSP+, disengage from the ‘anti-trade’ bias, integrate with GVCs, and restructure existing regional trade agreements.

Roads to Recovery

Dr Missaka Warusawitharana, Financial Economist, Johns Hopkins University, USA

Sri Lanka’s growth trajectory has not been in line with its true potential, adversely impacting the well-being of the people. This can be attributed to the low level of productivity growth. Although the manufacturing sector has contributed to growth, it has not demonstrated sufficient productivity that would enable the country to achieve a better output.

Further, the current fiscal difficulties can be pinned to structural imbalances in the country’s budgets that have spanned decades along with different administrations that have been unwilling to make hard choices. In the longer term, budgets must be structured to bring the debt down to a manageable level.

The world economy is moving away from physical goods to a digital-based economy, requiring greater provision of services. Sri Lanka scores well on the Human Development Index with its knowledgeable workforce. The need is to increase productivity by investing more in education and service-producing industries and improve the business environment by reducing institutional barriers.

Link to blog: https://www.ips.lk/talkingeconomics/2021/10/15/covid-19-and-the-sri-lankan-economy-policy-choices-and-trade-offs/

Chathurrdhika Yogarajah is a Research Assistant at IPS with research interests in macroeconomics and trade policy. She holds a BSc (Hons) in Agricultural Technology and Management, specialised in Applied Economics and Business Management from the University of Peradeniya with First Class Honours. She is currently reading for her Master’s in Agricultural Economics at the Postgraduate Institute of Agriculture, Peradeniya. (Talk with Chathurrdhika: chathurrdhika@ips.lk)

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Business

SLT MOBITEL and Fintelex empower farmers with the launch of Yaya Agro App

Published

8 hours ago

2026/01/15

Sahan Weerasooriya

From left to right – Supipi Nawarathne, Head, Department of Food Technology, UCIARS, Dr. Nisansala Widanapathirana, Head, Department of Agro Technology, UCIARS, Professor Champathi Gunathilake, Director, UCIARS, Dr. Nath Dharmasena, CEO, Fintelex Pvt Ltd, Sudharshana Geeganage, COO, Mobitel, Professor Indika Mahesh Karunathilaka, Vice Chancellor, University of Colombo, Pradeep Arunasiri, Consultant Agronomist – Digital Inclusion, Fintelex Pvt Ltd, and Madura Hewage, Senior Manager – VAS, Mobitel, at the launch of Yaya Agro.

SLT‑MOBITEL Mobile, in collaboration with Fintelex (Pvt) Ltd, has launched ‘Yaya Agro’, an exclusive all‑in‑one smart agriculture app designed to empower Sri Lankan farmers with the tools they need to grow smarter, safer, and more sustainably.

Yaya Agro represents a new era of digital farming in Sri Lanka combining technology, expert knowledge, and community empowerment to provide farmers the confidence to make smarter decisions, improve productivity, and build a sustainable future.

Developed with support from GIZ and Hatch and validated by leading academic and professional institutions including the University of Colombo, Institute for Agrotechnology and Rural Sciences, and the Sri Lanka Red Cross Society, Yaya Agro combines agricultural expertise, real‑time weather updates, first aid support, and AI‑powered assistance into a single, easy‑to‑use platform.

The launch of Yaya Agro positions SLT‑MOBITEL as an innovative, inclusive, and collaborative technology leader. Partnering technology and academic institutions, the company extends its role outside the sector into agriculture, empowering farmers with AI‑driven tools, multilingual access, and market connectivity. The initiative also strengthens SLT‑MOBITEL’s image as a champion of digital empowerment and sustainable development in Sri Lanka.

Functioning as a comprehensive digital companion, Yaya Agro is positioned as a digital farming companion, bringing precision agriculture, real‑time support, and market access to the fingertips of every Sri Lankan farmer.

Whether managing a small home garden or a large commercial farm, the app equips farmers with vital insights to improve crop yield, reduce risks, and connect directly with buyers through the integrated online marketplace.

Yaya Agro offers farmers daily crop information with expert tips on management, pest control, and best practices, all validated by the University of Colombo. It provides accurate, location‑based weather forecasts to help plan farming activities more effectively. The app also delivers life‑saving first aid tutorials and safety information verified by the Sri Lanka Red Cross Society, ensuring farmers are prepared for emergencies. With the AI chatbot assistant, farmers can access instant, personalized advice around the clock, with smart notifications delivering timely alerts and reminders tailored to crop cycles.

To make learning inclusive and accessible, Yaya Agro is available in Sinhala, Tamil, and English, offering interactive educational content such as videos, voice guides, and infographics. The app also integrates an online marketplace, developed in partnership with GIZ and Hatch, enabling farmers to connect directly with buyers and expand their reach. (SLT‑MOBITEL )

Business

Kegalle sets up District Planning Committee to rein-in development spending under IMF-backed reforms

Published

8 hours ago

2026/01/15

Sahan Weerasooriya

Dr. Patabendi addressing officials.

As Sri Lanka presses ahead with IMF-backed fiscal and governance reforms, the Kegalle District Planning Committee (DPC) was formally established yesterday as a standing sub-committee of the District Coordinating Committee (DCC), in a move aimed at tightening control over public investment, reducing duplication and strengthening monitoring at district level.

The committee was constituted under Home Affairs Circular No. 03/2025 issued by the Ministry of Public Administration, Provincial Councils and Local Government, and was inaugurated at the Kegalle District Secretariat auditorium under the leadership of Environment Minister and DCC Co-Chair Dr. Dhammika Patabendi and District Secretary H.M.J.M. Herath.

Addressing officials, Dr. Patabendi said the new structure directly responds to long-standing weaknesses in public investment management that have come under scrutiny during Sri Lanka’s engagement with the International Monetary Fund.

“Under the IMF programme, we cannot afford fragmented planning, overlapping projects or weak monitoring. This committee is about discipline—ensuring that limited public funds are allocated according to national priorities and deliver measurable outcomes,” Dr. Patabendi said.

He stressed that district-level planning must now align with national fiscal consolidation goals, with a stronger emphasis on value-for-money, results-based implementation and accountability.

The District Planning Committee will function as a permanent sub-committee of the DCC, chaired by the district’s Cabinet Minister, with the District Secretary serving as Secretary and the Director of Planning as Convener. Members include officials from district-level price and food committees and heads of government institutions or their nominees.

A central mandate of the committee is the preparation of an Annual Integrated District Development Plan, covering all funding sources—including foreign-funded and donor-supported projects—for approval by the District Coordinating Committee.

Officials said this would help rationalise project selection, prioritise urgent district needs and prevent the duplication of monitoring and evaluation systems, a key concern raised in public investment reviews under the IMF programme.

Dr. Patabendi noted that better coordination of state, private and non-state sector investments at district level would also support macro-level reform objectives by improving spending efficiency without increasing fiscal pressure.

“Fiscal adjustment does not mean stopping development. It means doing development better—through planning, coordination and proper evaluation,” he said.

The committee will oversee the operational rollout of DCC-approved projects, provide advisory support to implementing agencies, and monitor whether projects are delivered within approved timeframes and achieve stated targets.

Progress reports will be submitted to the Presidential Secretariat, Ministry of Public Administration, Ministry of Finance and the District Coordinating Committee, strengthening upward accountability.

At yesterday’s meeting, officials reviewed development proposals linked to the 2026 Budget, with focus on education, health, agriculture, infrastructure, industry, environment and tourism—sectors seen as critical for growth and social protection during the reform period.

Implementation challenges faced by projects carried out in 2025 across several Divisional Secretariat areas were also examined, with discussions centred on resolving bottlenecks early in 2026 and aligning future investments with the district’s five-year development plan.

Senior provincial and district officials, Members of Parliament from Kegalle, local authority heads and divisional secretaries attended the meeting.

Dr. Patabendi said the establishment of the District Planning Committee marked an important step towards embedding IMF-aligned public financial management reforms at the grassroots level, ensuring that development spending contributes to economic recovery while safeguarding fiscal sustainability.

By Ifham Nizam

Business

Allianz commits €200,000 for post flood recovery in Sri Lanka, part of €600,000 regional relief for Southeast Asia

Published

8 hours ago

2026/01/15

Sahan Weerasooriya

Allianz SE (Headquartered in Munich, Germany) announced that it is donating €200,000 to support disaster relief efforts in Sri Lanka. In addition, Allianz SE is also extending its support to Thailand and Indonesia, contributing a further €400,000 to aid disaster relief across Southeast Asia. Torrential rainfalls have triggered severe flooding and landslides across Southeast Asia, leaving more than 1,100 people dead in a week of devastation and complicating rescue efforts for hundreds still missing. Allianz is deeply rooted with local entities in the three countries and serving millions of customers across Asia. By supporting the affected people and communities, Allianz acts on its promise to secure the future of its stakeholders in times of need.

Allianz SE will allocate €100,000 to the Sri Lanka Red Cross Society (SLRCS) to deliver immediate assistance to those most affected and €100,000 will also be provided for post-disaster support, implemented in collaboration with Allianz Insurance Lanka Limited and selected local partners, focusing on disaster prevention and climate resilience, helping communities rebuild and strengthen their preparedness against future events.

Renate Wagner, Member of the Board of Management of Allianz SE, responsible for Asia Pacific, Mergers & Acquisitions, People and Cultures says:

“At Allianz, we stand with the people and communities affected by the severe floods and landslides across Southeast Asia. Through immediate relief and long-term resilience support, we aim to help families recover, strengthen local communities, and better prepare for future climate-related events.”

Anusha Thavarajah, Regional Chief Executive Officer, Allianz Asia Pacific adds:

“Across Indonesia, Thailand and Sri Lanka, many families and communities are facing significant loss and disruption. In moments like these, Allianz stands alongside them. Asia Pacific is home to our people, our customers, and the communities we serve, and we remain deeply committed to the region. Our immediate focus is on providing relief where it is most needed, while also supporting communities to rebuild and strengthen resilience, so those most affected can move forward with confidence.”

Allianz is fully dedicated to Asia and its people. It represents a strategic growth region for Allianz Group, which already has established strong market positions throughout Southeast Asia. Besides Indonesia, Thailand and Sri Lanka, Allianz is present with various business segments in China, India, Malaysia and Singapore, among others.