Business
IPS Policy Insights: COVID-19, the global economy and Sri Lanka’s external sector outlook
Global economic developments have impacted Sri Lanka’s external sector performance, and the economy overall. While Sri Lanka managed the first wave of the COVID-19 outbreak imposing lockdown measures for two months (March to May 2020), it has since been hit by a second outbreak since October 2020 and a third wave in April 2021. The latter is leading to a substantial increase in active cases of COVID-19, along with higher numbers of deaths, disrupting the gradual economic recovery witnessed from the second quarter of 2020. Merchandise exports, tourism earnings, and foreign direct investment (FDI) inflows are all bearing the brunt of the resultant fallout, except for remittance inflows into the country.
Merchandise Trade
Along with the considerable disruptions to world trade, Sri Lanka’s merchandise trade flows also proved to be fairly volatile, with the overall result being weakened exports and imports during the pandemic. Even prior to the pandemic, Sri Lanka’s long-term export growth rate was on a declining trend, albeit with some improvements in the immediate pre-COVID-19 years. In 2020, the pandemic amplified this long-term decline. Merchandise exports contracted by -15.6% in 2020 compared to the previous year, reflecting both demand and supply shocks.
Overall, as Sri Lanka’s export sector strategies and policies are not firmly integrated into regional and global value chains (GVCs), the impact of supply chain disruptions to the country’s export sector has not been very prominent. However, the country has been facing several adverse issues related to declining demand in its major export markets. Sri Lankan exports traditionally target product markets in a few destinations such as the US, UK and some EU countries. Its export basket too remains rather limited, with overwhelming dependence still on T&G and a few agricultural products. The need to revive export performance with sound strategies will take on even more urgency in the wake of the pandemic to build greater resilience.
As countries adjust to the economic fallout of the pandemic, existing global supply chains will change. Sri Lanka too must be prepared to change direction in favour of strengthening regional linkages. The Asian region is expected to recover swiftly, led by China’s resurgent economy. Whilst India is struggling to bring its latest COVID-19 spread under control, the Indian economy too can be expected to record a strong bounce back eventually. Against these developments, Sri Lanka must exploit potential integration opportunities with the Asian region, to better connect to trade, technology and FDI flows.
Compared to exports, Sri Lanka’s import expenditures fell even more sharply in 2020, contracting by as much as -19.5%. A part of the decline was no doubt a reflection of weakened private investment, declining oil prices and subdued consumer demand. However, a large quantum of the drop in import expenditures is due to restrictions imposed on ‘non-essential’ merchandise imports such as motor vehicles, as well as restrictions on import substitute sectors such as agriculture and processed agricultural food products.
Sri Lanka’s fuel import bill accounts for the country’s largest import category. The expenditure on fuel contracted by -34.7% in 2020 compared to 2019.1 Weakened oil prices in the global market and the sharp decline in domestic demand supported this contraction. While the oil price war between Organization of the Petroleum Exporting Countries (OPEC) and Russia, and declining global oil demand created this decline in prices, a continuation of these advantages cannot be expected as global demand picks up and oil producing countries agree to curb oil supplies.
Tourism and Remittances
In the aftermath of the Easter Sunday attacks in April 2019, Sri Lanka’s post-war tourism sector recovery came to an abrupt halt. In response, several strategies were implemented, including financial assistance to the sector as well as promotional campaigns to secure visitors. The mobility and physical containment measures imposed with the onset of COVID-19 dealt a further blow to the Sri Lankan tourism industry. With the suspension of tourist arrivals from all countries with effect from mid-March 2020, tourist arrivals came to a complete halt more or less for nine months (April to December 2020). International arrivals to the Sri Lankan border saw a sharp decline of -73.5% in 2020.
By contrast, Sri Lanka’s worker remittance inflows have performed much better than what had been forecast. Remittances had been experiencing a consistent decline over the past few years, reflecting external and internal developments related to foreign employment. In 2020, after an initial brief drop, remittances grew by 5.5% to USD 7.1 billion. The increase is perhaps explained by Sri Lankan migrants who may be remitting larger amounts as coping mechanisms for their households, as well as those remitting funds in preparation for returning to Sri Lanka owing to loss of employment in host economies. Additionally, the pandemic conditions, including limited mobility and greater uncertainty may have encouraged the diversion of remittances from informal to formal channels.
Capital Flows: FDI and Capital Market Trends
Even though Sri Lanka is argued to have a strategic geographical advantage straddling major shipping routes in the Indian Ocean, the country has not yet been able to convert this to substantive progress in attracting FDI inflows. FDI inflows saw some improvement in the post-war period and reached a peak in 2018 but has been on a declining trend thereafter. The pandemic has amplified this shrinkage. Retaining investor confidence through sound policy decisions, ensuring domestic security measures, and providing a transparent and accountable regulatory environment are vital to attract more FDI to the country.
The government is attempting to facilitate foreign investments into favourable locations in the country such as the Hambantota industrial zone, the Colombo Port City, as well as easing regulatory constraints to address time taken to set up a business in Sri Lanka, etc. The priority in these efforts appears to hinge on the Colombo Port City which will be granted special tax dispensations and other inducements to kick-start FDI inflows into mixed development projects and other infrastructure dominant sectors. The urgency to attract more FDI is partly related to the governments stated policy intention to move away from debt creating capital inflows to non-debt creating sources such as FDI. In the context in which Sri Lanka is struggling to access international capital markets in a COVID-19 environment, an enhanced inflow of FDI will provide relief on the external front.
Looking Ahead
For a country with a small domestic consumer base, Sri Lanka must remain competitive in international markets as a source of goods and services. Calibrating trade policies to integrate into re-fashioned GVCs, especially in a regional context, should remain an important part of the country’s medium-term recovery efforts towards a stable external sector environment that will support the country’s long-term growth and development aspirations.
* This Policy Insight is based on the comprehensive chapter on “COVID-19, Global Economic Developments and Impact on Sri Lanka” in the ‘Sri Lanka: State of the Economy 2020’ report – the annual flagship publication of the Institute of Policy Studies of Sri Lanka (IPS). The complete report can be purchased from the Publications Unit of IPS located at 100/20, Independence Avenue, Colombo 07 and leading bookshops island wide. For more information, contact 011-2143107 / 077-3737717 or email: publications@ips.lk.
Business
GS1 Lanka drives Sri Lanka’s shift to 2D barcodes
GS1 Lanka marked its 10th Annual General Meeting with a focus on the next stage of product identification in Sri Lanka, as businesses prepare for the wider adoption of 2D barcodes and the growing demand for trusted product information.
Addressing the AGM, GS1 Lanka president Revan Fernando noted that GS1 has been giving Sri Lankan products a globally recognised identity for more than 30 years. He pointed to the shift from traditional barcodes to 2D barcodes as the next major step, particularly as consumers increasingly look beyond a product’s identity to information they can trust about its origin, ingredients, authenticity and use.
GS1 Sunrise 2027 is a global industry initiative aiming to transition retail checkout systems to read 2D barcodes such as QR codes and Data Matrix codes alongside traditional 1D UPC stripes by the end of 2027
Under its Sunrise 2027 initiative, GS1 Lanka is working with the retail and healthcare sectors to prepare businesses for the transition to 2D barcodes. Unlike a conventional barcode used at checkout, a GS1 QR code can also connect consumers to a wider range of product information and support traceability and product verification through GS1 standards.
Fernando also called on brands to get involved in the transition, noting that the change will require businesses to rethink how they use the limited space on product packaging and how they communicate with consumers. GS1 Lanka will also introduce a new retail information platform to help member brands provide richer product information and improve the presentation of their products to consumers.
GS1 Lanka CEO Alikie Perera said the organisation’s work is increasingly focused on helping Sri Lankan businesses keep pace with changes in global supply chains and consumer expectations. The next phase will place greater emphasis on 2D barcodes, GS1 Digital Link, traceability and digital product information, as businesses prepare for a more connected and information-rich marketplace.
At the local level, GS1 Lanka continued its awareness programmes for entrepreneurs, SMEs, manufacturers and exporters, covering product identification, barcode standards, traceability, supply chain efficiency and market access. The organisation has also seen growing adoption of GS1 Activate and Verified by GS1, with more than 5,500 member companies registered on the platforms and over 20,000 product records uploaded.
The AGM concluded with a recognition of the contribution of GS1 Lanka’s members, partners, Board and team, while setting the direction for the organisation’s continued work to bring global standards and new product identification technologies into wider use among Sri Lankan businesses.
Business
Sri Lanka must rethink plastics before waste crisis deepens, says OUSL Vice Chancellor
By Ifham Nizam
Sri Lanka’s plastic problem can no longer be treated simply as a waste-disposal issue, with the country facing mounting pressure on its coastal environment, fisheries, communities and public health, Vice Chancellor of The Open University of Sri Lanka Senior Professor P. M. C. Thilakerathne said.
The country must move beyond collecting and disposing of plastic waste and fundamentally rethink how plastics are designed, produced, consumed and recovered, Prof. Thilakerathne said, calling for a national shift towards a circular economy.
Addressing the 3rd International Conference on Plastics, Innovations and Environmental Sustainability, he said Sri Lanka’s experience, particularly the environmental fallout from the 2021 X-Press Pearl disaster, demonstrated why plastic pollution required urgent national attention.
The X-Press Pearl disaster resulted in large quantities of plastic pellets being released into Sri Lanka’s coastal waters, with impacts extending to marine biodiversity, fisheries and coastal livelihoods.
For an island nation whose economy and communities are closely connected to the sea, he said, plastic pollution could not be viewed as an environmental issue separate from national development.
” For Sri Lanka, these figures are not abstract,” Prof. Thilakerathne said, pointing to the global growth in plastic production and waste.
The world produces hundreds of millions of tonnes of plastics annually, while only a small proportion of plastic waste is recycled. A substantial amount ends up in landfills or is leaked, dumped or otherwise mismanaged.
The scale of the global problem has direct relevance to Sri Lanka, he said, because waste that is inadequately collected or managed can ultimately find its way into waterways and the ocean.
The Vice Chancellor said Sri Lanka therefore needed to strengthen not only waste collection and recycling but also the systems that determine what products enter the waste stream in the first place.
“Much of the waste problem is decided at the drawing board,” he said.
Products should be designed for reuse, recycling and disassembly, while businesses should be encouraged to adopt models based on refill, repair and reuse rather than continued dependence on single-use plastics.
He said Sri Lanka also had an opportunity to develop locally appropriate alternatives using renewable resources and agricultural residues.
The country’s coconut industry and other agricultural resources could support research into alternative materials, he said, but scientists must ensure that such substitutes were genuinely environmentally sustainable and did not simply shift the environmental burden elsewhere.
For Sri Lanka, the challenge is particularly important because plastic pollution intersects with several economic sectors.
Fishing communities depend directly on healthy marine ecosystems, while tourism depends heavily on the country’s beaches, coastal areas and natural environment.
Plastic pollution can therefore translate into economic and livelihood pressures in addition to its ecological consequences, Prof. Thilakerathne said.
He also warned that the problem extended beyond visible plastic waste.
Microplastics and nanoplastics have been detected in drinking water, food and air, while research into their potential effects on human health is continuing.
The longer-term public-health implications represented an important area for scientific research, he said.
Prof. Thilakerathne called for stronger cooperation between universities, government institutions, industry and local communities to develop solutions suited to Sri Lanka rather than relying solely on technologies or approaches developed elsewhere.
Universities, he said, had a responsibility to generate the evidence needed for national policy and to ensure that research reached the communities and industries expected to implement it.
This is where OUSL could make a particular contribution, given its nationwide network and large population of students, including working adults, teachers, professionals and learners from rural communities.
The university plans to strengthen environmental sustainability and circular-economy principles across its curriculum, expand professional education on waste management and sustainable materials, develop international research partnerships and improve sustainable practices within its own campuses and centres, he said.
Prof. Thilakerathne also called attention to the thousands of people who earn a living through informal waste collection and recycling.
Any national strategy, he said, must recognise the contribution of these workers and ensure that the transition towards a circular economy does not leave them economically vulnerable.
Sri Lanka has already introduced restrictions on a number of single-use plastic products, but the Vice Chancellor said regulations must be accompanied by enforcement, investment in recovery infrastructure, industry participation and changes in consumer behaviour.
At the international level, he said, Sri Lanka also needed to contribute actively to efforts to address plastic pollution, backed by credible national scientific research.
The global nature of the plastics trade and pollution meant that action by individual countries alone would not be sufficient.
The conference therefore provided an opportunity for Sri Lankan researchers to connect local environmental challenges with international research and technological developments, he said.
Addressing young researchers and students, Prof. Thilakerathne urged them to measure the value of their work not only by academic publications but also by its ability to produce practical change.
He encouraged researchers to work across disciplines, engage with policymakers and industry, and remain connected to communities affected by the problems they study.
“The most meaningful research is that which changes practice,” he said.
He said Sri Lanka’s plastic crisis ultimately required a change in the country’s approach to materials, consumption and waste.
“Our task is not to abandon the material that shaped the modern world but to make it compatible with the sustainable one,” Prof. Thilakerathne said.
Business
The internationally acclaimed play ‘Every Brilliant Thing’ comes to Sri Lanka
Prepare for a theatrical experience that brings people together and celebrates life. The Peterite Arts Foundation, in proud association with World Vision Lanka, announces the showing of an amateur production arranged with Casarotto Ramsay & Associates Ltd. Every Brilliant Thing, the acclaimed solo play by Duncan Macmillan and Jonny Donahoe. Directed by Theruni Indrapala, the play’s lead is played by former Peterite Mario de Soyza. This uplifting, interactive production will run at Kamatha Studio, BMICH, Colombo, from 05 to 08 November 2026.
Every Brilliant Thing tells a deeply moving yet joyful story. At seven, the narrator begins listing everything worth living for, from ‘ice cream’ and ‘things with stripes’ to ‘rollercoasters’, hoping to help his mother through depression. Over time, the list grows to more than a million entries and becomes a lifelong source of comfort for the narrator.
What began as a short monologue in 2006 has grown into a global phenomenon, performed in more than 80 countries across five continents. Its hopeful message has reached audiences in extraordinary settings, including aboard the USS George H.W. Bush aircraft carrier. The play has also been translated into 44 languages, including Arabic and Greek, with a special Chinese adaptation titled Every Brilliant Little Thing.
The play’s need for emotional intelligence, openness and a strong connection with the audience attracted a distinguished line-up of performers. Following a successful West End run featuring Sue Perkins and Minnie Driver, the play made its Broadway debut at the Hudson Theatre, where it ran from 21 February to 9 August 2026. Tony Award winner Daniel Radcliffe opened the Broadway production, receiving critical acclaim and a Tony nomination for Best Lead Actor in a Play. Law & Order: SVU icon Mariska Hargitay then made her official Broadway debut in the role, followed by Golden Globe winner Tracee Ellis Ross, who closed the run.
-
Latest News5 days agoGold winner Tharanga gets brand-new Honda Vezel from SLAAJ
-
Features5 days agoWhy Sri Lanka needs an Inclusive Civic Nationalism – urgently
-
News4 days agoUS-assisted ‘Ice’ detection: NPC to examine IGP’s move to transfer drug-busting team
-
Features6 days agoThailand’s biggest new global star …
-
News6 days agoFirst cases taken up by SC after enactment of 22A dismissed
-
News5 days agoCivil society activist accuses govt. of favouring Ven. Gnanasara
-
Editorial3 days agoColombo Port drug bust: The plot thickens
-
Editorial6 days agoAftershocks of 22A
