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European Union overreacting to Sri Lanka import controls: CB Governor
ECONOMYNEXT
– The European Union, which protested Sri Lanka’s import controls, is over reacting, the island’s Central Bank Governor W D Lakshman said while officials said the data showed affected imports are minimal.
“The statement that was published here from the EU is probably an overreaction presented too early,” Governor Lakshman told reporters.
“We are at a time we are trying to resolve our balance of payments problems. Even under WTO rules, I think a country is allowed to do certain things which are needed to meet the balance of payments problems.”
Analysts have blamed the phenomenon on a strong prevalence of Mercantilism and lack of knowledge of classical economic theory.
Classical economists have blamed the ideology on Keynes naming his book a ‘general’ theory though it could only be practised without the balance of payments troubles when credit was weak or negative (Why Singapore chose a currency board over a central bank) and the teachings of arch-Keynesians like Alvin Hansen (IS-LM) which also has to assume no external trade (Mundell–Fleming model).
In 1971 the US also imposed trade controls called a ‘Nixon-shock’ as the dollar peg with gold collapsed from printing money to target an output gap. Sri Lanka then closed the entire economy.
Trade or current account deficits are driven by foreign-financed savings-investment gaps, while currency falls are triggered by central bank liquidity driven credit, classical economists say. Commodity prices are also expected to spike amid US dollar weakening as demand recovers.
In 2018, Sri Lanka injected liquidity to control rates first by terminating term repo deals, a so-called ‘buffer strategy’ and then through Treasury bill acquisitions in April, critics have said.
The ‘buffer strategy’ refusing to roll over maturing bonds as paper (which happens without an impact on reserve money or the exchange rate) and repaying them with a bank overdraft which was re-finance with window money. As the rupee fell gold imports which were being re-exported through a grey market.
Shortly after gold imports were banned in 2018, the rupee collapsed as more money was injected including through dollar-rupee swap of the types used by foreign speculators to bring down East Asian pegs.
In September more import controls were slammed, making nonsense of the free trade agenda of the then administration and making them a laughing stock.
Governor Lakshman said the emerging problem with the EU could be resolved with discussions.
“I think our external relations authorities are taking up this matter for discussion between Sri Lanka authorities and relevant EU authorities,” he said.
“I think discussions can solve this problem, which I am sure is a short term problem as far as we are concerned until we get out o the present difficulties.”
Officials said the impact on Europe, which had a large trade deficit with Sri Lanka and was a key destination of exports, was minimal.
“We studied the impact of import restrictions on imports from those countries it seems that the impact is quite minimal,” Director of Economic Research Chandranath Amarasekera said.
“As you know the most of the import restrictions are on non-essential imports and agricultural goods that are coming from because the government wants to promote domestic production of agricultural goods.”
“All of us need to understand why the import restrictions have been put in place,” Amarasekera said.
“It is primarily because of the difficult situation that we are in. We have saved about 3 billion dollars because of the reduction of import this year in the first 10 months.”
Analysts, however, have warned that with excess liquidity injected by domestic asset acquisitions, that imports can pick up (or domestic prices to rise) as credit is fungible.
Assistant Governor N Nanayakkara said some of the restrictions have been relaxed; imports for re-exports have also been relaxed. He said the government has said that items such as cars will be kept for a year.
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Our objective is to ensure that the Commission to Investigate Allegations of Bribery or Corruption operates as an independent institution, free from any external influence – PM
Prime Minister Dr. Harini Amarasuriya stated that the government’s objective is to ensure the environment for the Commission to Investigate Allegations of Bribery or Corruption [CIABOC] to function as an independent body, without influence from anyone, including Members of Parliament and Ministers.
The Prime Minister made these remarks while participating in the debate on the interim resolution concerning the determination of salaries and service conditions of the officers and employees of the Commission under the Anti-Corruption Act.
The Prime Minister stated:
“Honourable Speaker, I consider the proposal presented today on determining the remuneration and service conditions of the officers and employees of the Commission to Investigate Allegations of Bribery or Corruption to be highly important. Although the Anti-Corruption Act was passed in 2023, we only began to truly feel the presence of an active Commission from 2025.
Since then, we have had to experience a number of challenges in operationalizing the Commission. In particular, there were several obstacles, including limitations in recruiting officers, which hindered the Commission from functioning as required. It was necessary to establish several practical conditions, such as granting the Commission the freedom to determine allowances for its staff, to formulate the rules and regulations required for its operations, to recruit personnel, and to submit budget estimates relevant to its annual plans. At the time the new Director General assumed duties, there were over 4,000 investigation files within the Commission where investigations had been completed but cases had not yet been filed. Moreover, there were only about 31 legal officers.
Follow the adoption of this proposal, the Commission will be granted the authority to recruit officers, determine necessary allowances, and make independent decisions regarding financial matters. This will enable the Commission to effectively fulfill its intended mandate. This proposal plays a significant role in building a new political culture in our country, one that is anti-corruption and committed to a transparent public service that is free from bribery”.
Further commenting, the Prime Minister also addressed the country’s response to the ongoing global energy crisis.
“In the current global context, our economy and energy sector are facing multiple challenges. These conditions are constantly evolving and difficult to predict. However, it is our responsibility as a government to recognize these changes and manage their impact on our economy.
Following that, the Cabinet has decided to appoint four special committees. Accordingly, one committee will focus on ensuring the uninterrupted provision of essential services to the public; while another will make decisions on maintaining public services through energy management within the public sector; a third will work with the Procurement Commission to identify new methods of energy procurement in addition to existing mechanisms; and a fourth will examine the social impacts arising from this situation, including its effects on vulnerable groups, and recommend fair solutions, relief measures, and welfare services.
This is a situation that we, as a country, must face collectively. The public service, the private sector, the political leadership regardless of party differences and the people of our country must come together to overcome this, just as we have faced previous challenges. We are confident that, we will be able to successfully face this situation through proper leadership and management, and by making timely decisions.
[Prime Minister’s Media Division]
Latest News
Heat Index at ‘Caution Level’ in the Western, Sabaragamuwa, North-central, Southern and North-western provinces and in Monaragala, Mannar, Vavuniya and Mullaitivu districts
Warm Weather Advisory Issued by the Natural Hazards Early Warning Centre of the Department of Meteorology at 3.30 p.m. on 18 March 2026, valid for 19 March 2026
The general public are cautioned that the Heat index, the temperature felt on human body is likely to increase up to ‘Caution level’ at some places in the Western, Sabaragamuwa, North-central, Southern and North-western provinces and in Monaragala, Mannar, Vavuniya and Mullaitivu districts.
The Heat Index Forecast is calculated by using relative humidity and maximum temperature and this is the condition that is felt on your body. This is not the forecast of maximum temperature. It is generated by the Department of Meteorology for the next day period and prepared by using global numerical weather prediction model data.

Effect of the heat index on human body is mentioned in the above table and it is prepared on the advice of the Ministry of Health and Indigenous Medical Services.
ACTION REQUIRED
Job sites: Stay hydrated and takes breaks in the shade as often as possible.
Indoors: Check up on the elderly and the sick.
Vehicles: Never leave children unattended.
Outdoors: Limit strenuous outdoor activities, find shade and stay hydrated.
Dress: Wear lightweight and white or light-colored clothing.
Note:
In addition, please refer to advisories issued by the Disaster Preparedness & Response Division, Ministry of Health in this regard as well. For further clarifications please contact 011-7446491.
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Pay hike demand: CEB workers climb down from 40 % to 15–20%
A salary increase in the range of 15 to 20 percent is currently under discussion within the Ceylon Electricity Board (CEB), though no official decision has yet been taken, The Island reliably learns.
A senior electrical engineer who is is privy to ongoing salary negotiations, speaking on condition of anonymity, said the proposal had been put forward as a reasonable and necessary measure, rather than a rigid demand, in light of the prolonged delay in salary revisions. Earlier they have been asking for a staggering 40% salary increase.
“We are not insisting on this as a primary demand or condition. What we are requesting is for the authorities to seriously consider the possibility of granting an increase,” he said.
He emphasised that CEB employees had not received any salary increment since 2024 due to the ongoing reform and restructuring process, leaving staff to cope with rising living costs without adjustment.
“Under normal circumstances, the next salary revision would only be due in January 2027. That creates a significant and unfair gap. This proposal is, therefore, a justified attempt to secure at least a reasonable percentage in the interim,” he said.
The engineer warned that continued inaction could have serious implications for staff morale and operational efficiency at a time when the power sector is undergoing critical reforms.
Sources said that while internal discussions have pointed towards a 15 to 20 percent increase, the matter has not yet been formally taken up at policy level.
However, pressure is mounting on authorities to reach a timely and equitable decision, as frustration grows among employees over the absence of salary adjustments for nearly three years.
By Ifham Nizam
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