Business

How U.S. tariffs and a fragile rupee are exposing Sri Lanka’s export vulnerabilities

Published

11 months ago

2025/05/16

Prof. Sirimal Ashoka Abeyratne

As Sri Lanka navigates the delicate path of economic recovery, two mounting challenges have converged to expose deep-rooted vulnerabilities in its export economy: the appreciation of the rupee over the past two years and a fresh wave of reciprocal tariffs imposed by the United States. For a country where nearly a quarter of exports are US-bound, these developments carry serious implications—not just for revenue, but for investment, competitiveness, and long-term growth.

According to leading economist Prof. Sirimal Abeyratne, these pressures should be seen less as external shocks and more as symptoms of underlying structural gaps. “The problem isn’t just what Trump did,” he explains. “It’s the fact that Sri Lanka has been running an overly protective and inefficient trade regime for decades. What this tariff move has done is hold a mirror up to our own weaknesses.”

The newly proposed US tariff regime, introduced under the justification of ‘reciprocal trade fairness,’ penalises countries running large bilateral trade surpluses with the US. Sri Lanka, despite its relatively small export volume, is among the top targets. Apparel exporters—already grappling with squeezed margins—will be faced with an additional 44% duty from the 8th of July, on top of the existing Most Favoured Nation tariff rate, threatening their foothold in key global markets. The bigger risk, Prof. Abeyratne warns, is not just losing market share, but losing investments altogether. “If it becomes cheaper to produce in Vietnam or Bangladesh, export oriented companies especially apparel will follow the logic of survival—and shift operations.

Currency volatility adds another layer to this precarious equation. While the Central Bank’s recent management has kept the rupee around the Rs. 300 mark against the dollar, exporters have seen reduced earnings due to rupee appreciation in the past six months. “You can’t have an appreciating currency, shrinking export margins, and increased external tariffs all at once. It strangles competitiveness,” notes Prof. Abeyratne. “And if the US dollar begins to weaken globally—which is likely, given their own trade contraction and inflationary pressure—that adds a whole new level of unpredictability for us.”

Behind the scenes of these challenges lies an even bigger issue: Sri Lanka’s failure to diversify its markets, modernise its trade policy, and connect to global value chains. “We’ve been talking about export-led growth since liberalisation in 1977,” Dr. Abeyratne says. “Yet, we’re still stuck at US$12–13 billion in annual exports. That’s not a success story—that’s a serious policy failure.”

Part of the problem, he argues, is self-inflicted. Complex para-tariffs, erratic import controls, and domestic taxes on inputs have made production more expensive and unpredictable. “Even taxes on imports hurt exports—especially in sectors like apparel, where imported raw materials are critical. When you overtax imports, you essentially tax your exporters too.”

While countries like India have signed over 17 comprehensive Free Trade Agreements, Sri Lanka has struggled to expand beyond a handful of partial trade agreements. Public resistance, politicisation, and poor implementation have all contributed to missed opportunities in integrating with regional supply chains. “We’ve isolated ourselves from global trade patterns, while others moved ahead. Our trade controls are not just outdated—they are counterproductive.”

On the fiscal side, the country’s overdependence on manufacturing and service taxes—nearly 14% of government revenue—presents a further obstacle to reform. Reducing tariffs requires a broader restructuring of the tax system, including stronger mechanisms for direct taxation and digital traceability. “We need a technology-driven way to monitor income and spending. If India can do this with a population of 1.5 billion, why can’t we manage 22 million?” he asks.

The road ahead is not without options. Prof. Abeyratne believes the 90-day window before full implementation of the US tariffs presents a rare opportunity for introspection—and action. “This isn’t just about salvaging our trade with the US. It’s a wake-up call. We must overhaul our trade policy, streamline our tariff structure Eg: removing para-tarrifs, and make it easier for exporters to compete globally.”

He also points to the need for a market driven exchange rate policy that supports exporters without destabilising inflation targets. “Letting the rupee gradually depreciate, when done right, can be a powerful tool to maintain export momentum—especially when external conditions are stacked against us.”

In closing, Prof. Abeyratne offers a sobering reminder: “The damage we’ve done to our export economy over the years—through poor policies and neglect—is far greater than what any foreign government could impose on us. The question now is whether we are willing to fix it.”

Sirimal Abeyratne PhD is Emeritus Professor of Economics at the University of Colombo, Sri Lanka. Currently, he serves as Chair of the Stakeholder Engagement Committee of the Central Bank of Sri Lanka and Executive Director of the Centre for Poverty Analysis (CEPA), while contributing to the development policy dialogue and green financing efforts of the country.

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Business

Parliament rocked by LKR 13.2 billion NDB fraud: Systemic failure or regulatory lapse?

Published

7 hours ago

2026/04/9

Sahan Weerasooriya

Ravi Karunanayake and Bimal Ratnayake

The corridors of power in Sri Lanka’s Parliament became a theater of intense debate on April 7, 2026, as lawmakers confronted the fallout of the National Development Bank (NDB) fraud scandal. What began as a Securities Exchange Commission (SEC) disclosure has now transformed into a scathing critique of the nation’s financial regulatory domain.

Opposition MP Ravi Karunanayake took to the floor to demand accountability, not just from the bank, but from the regulatory authorities themselves. Highlighting the alarming jump in reported losses – from an initial LKR 380 million on April 2nd to a massive LKR 13.2 billion by April 6th – Karunanayake questioned how such a systemic breach could occur undetected.

“I want to focus your attention on the operations… and its supervision process,” Karunanayake told the House. “I was more shocked about what we heard at the Public Finance Committee… as there was no one to take the responsibility for detecting this earlier”.

The MP emphasised that his intention was not to trigger a ‘run’ on the bank, but to ‘purify’ oversight mechanisms, which he suggested had failed in their primary duty of early detection.

The gravity of the situation was underscored by Minister Bimal Ratnayake, who confirmed that the President has been formally briefed on the fraud. The Minister assured Parliament that the administration would take all necessary actions to ensure ‘financial sector’s discipline’ in the wake of this fraud.

Regulatory authorities have already moved to assert authority, issuing a statement on April 5, 2026, to provide oversight and maintain liquidity stability. However, the ‘appropriate regulatory support’ mentioned came with heavy strings attached as follows:

Dividend Freeze: The bank was ordered to immediately suspend cash dividends scheduled for distribution in April 2026.

Operational Curbs: NDB has been directed to restrict discretionary spending and halt all branch expansions until further notice.

Forensic Mandate: Under regulatory and board pressure, NDB is appointing an independent forensic auditor to conduct an impartial review of its systems.

The LKR 13.2 billion fraud is estimated to impact NDB’s unaudited total asset base by 0.7%. While NDB Chairman Sriyan Cooray and CEO Kelum Edirisinghe were noted for their expertise by Ravi Karunanayake, the focus has shifted toward the systemic vulnerability of the sector. As the criminal investigation and internal inquiries proceed, the primary question remains: how did a fraud of this magnitude remain invisible to the regulators until it reached the breaking point?

With the Public Finance Committee now involved, the NDB incident is no longer just a corporate crisis – it is a test of the integrity of Sri Lanka’s entire financial supervisory framework.

By Sanath Nanayakkare

Business

Ceylon Chamber of Commerce announces leadership transition

Published

7 hours ago

2026/04/9

Sahan Weerasooriya

Shiran Fernando / Perera / Alikie

The Ceylon Chamber of Commerce announces a planned and orderly leadership transition, underscoring its commitment to strong governance, leadership continuity, and long-term institutional stability.

Accordingly, Shiran Fernando has been appointed Secretary General and Chief Executive Officer, effective 8th May 2026, succeeding . Buwanekabahu Perera, who will conclude a three-year tenure at the helm of the Chamber.

Commenting on the transition, Krishan Balendra, the Chairperson of The Ceylon Chamber of Commerce stated:

“This leadership transition reflects the Chamber’s long-standing belief that strong institutions are built through continuity, sound governance, and deliberate succession planning. Over the past three years, the Chamber has been further strengthened institutionally, allowing us to move forward with confidence. The Board is fully assured that this transition will ensure stability while positioning the Chamber to meet the evolving needs of our members and the broader economy.”

Supporting this transition, institutional stability is further reinforced by the continued leadership of Ms. Alikie Perera, who serves as Deputy Secretary General, Chief Operating Officer / Financial Controller and CEO of GS1 Lanka. With over three decades of service spanning multiple leadership cycles and governance eras, including service under 16 successive Chairpersons, she has been instrumental in sustaining the Chamber’s operational integrity and financial discipline. Notably, she has played a key role over two decades in steering the Chamber’s flagship platforms, including the Sri Lanka Economic and Investment Summit (SLEIS) and the Best Corporate Citizens Awards [BCC Awards], both of which have become nationally and internationally recognised benchmarks. Her continued role provides assurance that institutional memory and organisational continuity remain firmly intact.

Business

Dialog Finance Launches Next-Generation Virtual Debit Card, Elevating Digital Payments in Sri Lanka

Published

7 hours ago

2026/04/9

Sahan Weerasooriya

Dialog Finance PLC, Sri Lanka’s leading fintech innovator, announced the launch of its Virtual Debit Card, the first in Sri Lanka to enable customers to generate multiple virtual cards for different purposes within a single app. This cutting-edge, digital-first payment solution is designed to deliver smarter control, enhanced security, and effortless everyday transactions, making online payments safer, more flexible, and fully manageable through the Genie app.

Designed for today’s mobile-first lifestyle, the Virtual Debit Card is managed seamlessly within the Genie app, allowing customers to generate multiple virtual cards tailored for specific use cases such as subscriptions, individual merchants, or shared spending scenarios. Each card offers customizable spending limits, real-time transaction tracking, and the option to delete or deactivate it once its defined use is complete. By isolating transactions across different purposes, this approach significantly enhances online payment security while providing complete visibility and control.

Issued on the UnionPay International network, the Virtual Debit Card ensures wide global acceptance for online and in-store payments. It also paves the way for future enhancements, including Tap to Pay functionality on NFC-enabled smartphones, enabling fast, contactless in-store transactions scheduled to be activated soon as part of Dialog Finance’s ongoing product evolution.

Commenting on the launch, Nazeem Mohamed, CEO & Director of Dialog Finance PLC, said, “This launch strengthens our position as Sri Lanka’s leading fintech provider. By offering multiple virtual cards, and intuitive in-app controls, we are delivering a secure, flexible digital payment experience that perfectly aligns with modern customer needs.”

The Dialog Finance Virtual Debit Card is now available exclusively through the Genie mobile app, allowing customers to instantly generate, manage, and control their cards from a single interface. This milestone further solidifies Dialog Finance’s leadership in delivering customer-centric, innovation-led digital payment solutions in Sri Lanka.

Dialog Finance PLC, a subsidiary of Dialog Axiata PLC, is a licensed finance company regulated by the Central Bank of Sri Lanka. The Company offers a range of digital-first financial solutions to individuals, businesses, and corporations, and is backed by a strong Fitch Rating of AA (lka), reflecting its financial stability, robust governance, and high creditworthiness.