Business

Interest rate cut: A calculated easing or a signal of deeper economic concerns?

Published

7 months ago

2025/05/26

In a move that surprised many market watchers, the Central Bank of Sri Lanka (CBSL) opted to reduce its Overnight Policy Rate (OPR) by 25 basis points to 7.75% at its May 2025 monetary policy meeting. This decision came against the backdrop of widespread expectations that rates would remain steady, based on relatively benign inflation and improving macroeconomic indicators.

According to the CBSL’s Monetary Policy Review, the rationale behind the rate cut was rooted in a forward-looking assessment of inflation, growth, and global risks. With inflation projected to turn positive and gradually move toward the 5% target in the third quarter, and core inflation expected to edge upward, the Bank views the current environment as conducive to further monetary easing. The CBSL anticipates that this move will encourage credit growth and support an economy that is showing signs of domestic recovery, albeit within the context of increasing global uncertainty.

Furthermore, CBSL notes that market interest rates have already adjusted downward, and it expects this latest policy easing to translate into even lower lending rates, thus enhancing liquidity and credit expansion which are key ingredients in sustaining economic momentum.

This decision, however, diverged sharply from the pre-policy outlook of First Capital Research, which assigned an 80% probability to policy rates remaining unchanged. They expected the Central Bank to ‘hold the line’, given that key economic indicators were gradually strengthening. While First Capital did consider a small chance of a 25bps cut (15%), it was seen more as a low-probability measure.

Their analysis also foresaw a largely stable policy environment due to improved liquidity and external sector support, including gains from tourism and remittances. Hence, the actual policy shift suggests that the CBSL is more preemptively cautious or perhaps subtly concerned about lingering fragilities beneath the surface.

A sharper and more critical lens was provided to The Island by an independent analyst, who suggests that the rate cut may signal deeper structural concerns. “The Central Bank is trying to respond to an economy which is not working due to lack of market confidence,” the analyst asserted.

While the CBSL frames the rate cut as proactive monetary easing, this observer suggested that it could reflect a broader unease with the sustainability of Sri Lanka’s current economic trajectory.

The analyst further raised an unsettling point stating, “While a precise tipping point is hard to predict, the overall trajectory of the economy appears to be unsustainable. From this perspective, the unexpected rate cut may be less about inflation management and more about buying time and restoring market confidence in an economy still contending with the effects of external debt pressures, exchange rate volatility, lower external demand, and even possible capital flight.”

“Taken together, the CBSL’s move underscores the complex balancing act it faces, supporting growth in an economy still vulnerable to shocks, while aiming to stabilise inflation, preserve external sector gains and build reserves. The rate cut could stimulate further credit and activity in the short term, but its effectiveness will depend largely on whether investor confidence and structural reforms keep pace,” he said,

Sri Lanka’s economy is, without doubt, showing signs of healing. Yet, as the independent analyst cautioned, the path forward may not be as stable as the official narrative suggests. The CBSL’s surprise move may be read as either a timely stimulus or a subtle distress signal, depending on which set of indicators one chooses to believe.

The following comments were made by Dr. Nandalal Weerasinghe at the monetary policy press briefing held on May 22.

“There are two key changes between the March 2025 and May 2025 monetary policy reviews. First, our inflation outlook has shifted slightly. In March, the inflation fan charts we presented showed a trajectory moving from deflation toward our target of 5% inflation over the next 18 to 20 months. However, since then, actual and expected inflation has been lower than we previously anticipated. Inflation expectations have declined, and the projected path on our charts has shifted downward. In short, we are still heading toward the 5% target, but at a lower pace than before.”

“Second, there has been a weakening in aggregate demand, particularly external demand. This decline is due to global trade disruptions, including increased tariffs and geopolitical tensions. The IMF has also revised its global growth forecast downward by 0.5%, reinforcing the expectation of softer external demand.”

“So, looking at both sides, with lower-than-expected inflation and weaker external demand, there is now more space to reduce interest rates compared to our assessment in March. As a result, we decided to lower policy rates, expecting that this will support our inflation target of 5% while maintaining price and economic stability.”

“This policy easing should also provide a boost to domestic economic activity. In terms of the external sector, despite the lower external demand, tourism earnings and remittances remain encouraging. Global petroleum prices are currently favorable.”

“We are now entering the third consecutive year of a current account surplus, a historical occurrence in our economic history. Notably, this surplus has been achieved even after fully lifting all import restrictions, including on motor vehicles.”

“Given this, we are confident in our ability to build foreign reserves and maintain a stable exchange rate. If volatility arises, we have the capacity to intervene, but we remain committed to a flexible exchange rate regime, allowing the market to determine the rate under normal conditions,” the Governor said.

By Sanath Nanayakkare ✍️

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Business

Browns Investments sells luxury Maldivian resort for USD 57.5 mn.

Published

11 hours ago

2025/12/21

Thilina Walpola

A five star 100-room Maldivian resort hotel property controlled by Browns Investments PLC has been disposed for USD 57.5 million, Browns Investment said in a stock exchange filing on Friday. The company had previously disclosed in September that the deal was in the pipeline pending completion of precedent conditions.

The property. Barcelo’ Whale Lagoon Maldives, belonged to Browns Ari Resort (Private) Ltd., a subsidiary of Browns investments, was purchased by ASB Hotel Properties Maldives Private Ltd.

“The transaction was completed following the satisfaction of the conditions precedent set out in the Sale and Purchase Agreement, for a total consideration of USD 57,500,000,” the filing said. The price was considered “significant” but was not the highest in the Maldives where high end hotel properties command top dollar.

Browns Investments (BIL) has a significant presence in the Maldives, developing multiple properties, notably through partnerships with Spain’s Barceló Hotel Group for projects like Barceló Whale Lagoon (now sold), Barceló Nasandhura (city hotel/apartments), and the Bodufaru Beach Resort (a major integrated project with three hotels) in North Male Lagoon, with BIL aiming to be a major Sri Lankan hotel operator in the Maldives with large room capacity.

BIL’s key Maldives projects are:

Bodufaru Beach Resort: A large-scale development in North Male Atoll with three five-star hotels, a significant undertaking with Barceló Hotel Group and Syno Hydro Corporation.

Nasandhura Palace Hotel (Barceló Nasandhura): A luxury city hotel and apartment complex in Male, managed by Barceló.

Strategy & Partners:

Browns Investments partners with Barceló Hotel Group, a Spanish hotel chain, for management and investment in their Maldivian properties.

The company aims to become the largest Sri Lankan hotel investor and operator in the Maldives, significantly expanding its room keys in the region, as described on the Browns Investment website.

Browns Investments is actively developing and managing luxury hotel properties in the Maldives, focusing on large integrated resorts and city hotels, leveraging international partnerships to grow its presence in the high-end tourism market, according to the company.

Business

Marketing Alumni Association of USJ Outlines Strategic Vision to Strengthen the Future of Marketing in Sri Lanka

Published

12 hours ago

2025/12/21

Thilina Walpola

Executive Committee of the Marketing Alumni Association

The Marketing Alumni Association (MAA) of the University of Sri Jayewardenepura (USJ) set out its strategic direction for the year ahead at its Annual General Meeting (AGM) held on 10 December 2025. The event brought together academic representatives from the Department of Marketing Management and a strong contingent of alumni, providing a platform to review the association’s progress and reaffirm its commitment to advancing the marketing profession in Sri Lanka.

As the official body representing graduates of the Department of Marketing Management of the University of Sri Jayewardenepura, the MAA has, over the past 25 years, supported a network of more than 1,500 marketing professionals who now hold influential roles in leading private and public sector organizations. The association remains committed to elevating the standing of the Japura Marketing degree by strengthening industry partnerships, supporting academic excellence, and fostering a high-performing alumni community.

A key focus of the AGM was the appointment of Oshadee Withanawasam as President of the MAA for the upcoming term (2025-2027). In his inaugural address, Mr. Withanawasam emphasized the importance of strategic leadership, industry relevance, and collaborative growth in positioning USJ and its alumni at the forefront of marketing innovation in Sri Lanka.

Over the past year, the MAA has intensified its engagement efforts through a series of high-impact initiatives. The Kings and Queens Dinner Dance 2025, which brought together over 200 members, strengthened camaraderie within the alumni network. On the academic front, the association’s flagship ‘Fine Touch’ guest lecture series, conducted in partnership with the Department of Marketing Management, USJ, continued to offer undergraduates valuable exposure to industry best practices and emerging trends.

A significant milestone for the association was the launch of its first structured mentoring program for undergraduates of the department. This initiative marks a notable advancement in bridging academic training with practical corporate experience, equipping students with the competencies required to excel in a competitive business environment.

The MAA also continued to deliver meaningful social impact through its ‘Bring a Smile’ initiative, which has supported rural schoolchildren for three consecutive years (2023–2025) by providing essential stationery supplies. Further strengthening its commitment to education, the association introduced a scholarship scheme in 2024 to support deserving undergraduates pursuing their higher education in marketing.

During the AGM, outgoing President Dr. Darshana Jayasinghe and the Head of the Department of Marketing Management of USJ, Prof. Sandamali Galdolage, commended the association’s continued progress and reiterated their support for its long-term vision.

The following office bearers were appointed for the new term: Oshadee Withanawasam (President), Amitha Amarasinghe (Deputy President), Nipuni Karunarathna (Vice President), Vimukthi Kaushalya (Secretary), Thisaru Menake (Assistant Secretary), Nuwan Indika (Treasurer), and Thilanka Kalpage (Assistant Treasurer). Committee Members for the term include Prof. Ashoka Malkanthie, Chandra Kodithuwakku, Manuri Jayasinghe, Champika Vincent, Naleendra Yasassri Perera, Kaushan Agalawatte, Chandranath Gamage, and Pamudi Ketawalage.

Dr. Darshana Jayasinghe and Lalith Sumanasiri will serve as Advisors, while Prof. Sandamali Galdolage, Manojee Dabare, and Prof. Lalith Chandralal will continue as Trustees of the MAA.

Business

18 certified sales training consultants graduate at BMICH

Published

12 hours ago

2025/12/21

Thilina Walpola

A graduation ceremony for 18 Certified Sales Training Consultants, qualified to mentor aspiring marketing professionals and enhance standards in the country’s sales sector, was held recently at the Bandaranaike International Conference Hall.

The graduates represent the first phase of a programme aimed at producing 50 Certified Sales Training Consultants nationwide. The training and certification were conducted by the Asian College of Sales and Marketing (ACSM).

According to ACSM Director and Learning Consultant Sugath Munasinghe, the need for professionally certified sales training consultants to raise the quality and effectiveness of the sales sector has been identified for some time. He added that ACSM, as a higher education institute, will continue to provide structured training and certification to meet this demand.