Business

JAAF calls on GoSL to urgently reconsider SVAT abolition

Published

2 years ago

2024/07/27

Inside a Sri Lankan apparel factory

With the countdown to the forthcoming abolition of the Simplified Value-Added Tax (SVAT) system ticking down to an end date of April 1, 2025, the apex body of the Sri Lankan apparel industry, the Joint Apparel Association Forum (JAAF) urged the government to urgently reconsider its decision in light of growing stresses on the industry, a press release said.

The release adds: “The apparel sector is currently grappling with significant challenges in the global market, which is already being reflected in reduced export figures. At such a time, the removal of SVAT without first establishing a viable and efficient refund mechanism is going to drastically disrupt cash flows for all exporters including the apparel industry, which makes up nearly half of the nation’s entire export portfolio. Failure to reconsider this policy will almost certainly exacerbate financial strain on the sector, and further erode Sri Lanka’s export competiveness as funds will inevitably be tied up in refund processes, even in the most efficient systems,” said Bandula Fernando, chairman, Sri Lanka Chamber of Garment Exporters – which represents the SME sector with JAAF.

‘While authorities have committed to “significantly speed up valid VAT refunds” the apparel industry has maintained its position that this commitment has not been met with no measurable improvements on time taken for refunds having been achieved as yet. According to Fernando, any decision to proceed with abolition of the SVAT scheme in the absence of any tangible progress on speeding up valid VAT refunds would be catastrophic, particularly for the SME sector.

“The SME sector is really struggling right now and if the removal of the SVAT system goes ahead this will be a major burden on the cash flows of the SME sector. Despite the law requiring for refunds to be made within 45 days, exporters have legitimate VAT refunds due as far back as 2010 and no interest is paid on these delayed refunds. In that time, the Sri Lankan rupee has lost 69% of its total value. Such inefficiencies will create insurmountable obstacles for SME apparel exporters, and severely erode cash flows even for larger players,” he noted.

‘Meanwhile, JAAF Secretary General, Yohan Lawrence stressed that JAAF and its members recognize and appreciate the government’s need to meet revenue targets as part of the IMF program However, he noted that the decision to remove the SVAT scheme had unfortunately been made on two incorrect assumptions, namely: that the current system creates revenue erosion and that the removal of SVAT would enhance the revenue collection for the state.

“This claim has not been substantiated in respect of the formal apparel sector where the SVAT system is used for the sourcing of intermediary goods for the manufacture of apparel. The industry has been on a journey of backward integration whereby supply of raw materials has moved away from being imported to being manufactured locally. Removal of the SVAT system will reverse this trend, leading to more imports,” Lawrence cautioned.

‘According to industry experts, the primary effect of abolishing SVAT would be increased cash flow between exporters and the IRD, and not increased revenue. Sri Lanka’s history with VAT refunds prior to SVAT was marked by significant delays, with refunds due for over 18 months, creating significant financial bottlenecks for exporters.

‘Historically, VAT refund systems have been prone to fraud, particularly in the non-export sector. The SVAT system effectively mitigates this risk by limiting the scope for abuse. Exporters, who utilize SVAT to purchase local inputs for conversion into export products, have minimal local sales, thus reducing potential misuse. Conversely, the likelihood of fraud is significantly higher in an inefficient payment and refund system compared to the voucher-based SVAT system.

‘Moreover, the reintroduction of a VAT refund system may compel apparel exporters to import raw materials rather than purchasing domestically. This shift would not only strain cash flows but also increase imports and reduce incentives for domestic value addition, negatively impacting the balance of trade.

‘Under SVAT, apparel exporters could purchase local raw materials without immediate cash outflows for VAT, promoting the use of domestically produced inputs. With the inefficient refund system, the incentive to buy local decreases. Such a scenario would eventually undermine the unique vertical integration benefits that Sri Lanka’s apparel industry offers, potentially threatening the sector’s viability and the jobs it supports.

“Reinstating a VAT refund system will demand substantial resources from the IRD for ongoing follow-ups and evaluations, leading to increased administrative costs and misallocation of precious resources. The additional burden on both the IRD and the industry is unnecessary and counterproductive,” Lawrence added.

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Business

Middle East tensions may hit tourism and energy sectors

Published

13 hours ago

2026/03/17

Sahan Weerasooriya

Tourists admiring nature’s abundance in Sri Lanka.

Escalating geopolitical tensions in the Middle East involving Iran are beginning to raise concerns here, with analysts warning that the fallout could affect not only the island’s tourism industry but also its energy sector.

Tourism stakeholders say the first signs of a slowdown in visitor arrivals have begun to emerge as airlines and travel operators adjust to disruptions across key Middle Eastern aviation corridors.

According to Harsha Suriyapperuma, Chairman of the Sri Lanka Tourism Development Authority, the current tensions could temporarily influence travel flows mainly due to disruptions affecting major transit hubs in the Gulf region.

A significant share of travellers heading to Sri Lanka from Europe and other long-haul destinations transit through aviation hubs such as Dubai, Doha and Abu Dhabi.

Industry analysts say that when geopolitical tensions escalate in the Middle East, airlines often revise flight paths, cancel services or adjust schedules due to security concerns and airspace restrictions, which can slow tourism flows to destinations like Sri Lanka.

According to a Tourism industry leader, global travel demand is highly sensitive to geopolitical developments affecting major aviation corridors.

He noted that disruptions to Middle Eastern airspace could result in longer travel routes, higher airline operating costs and increased airfares, which may influence the travel decisions of tourists planning long-haul holidays.

At the same time, economists and energy analysts warn that the conflict could also create ripple effects in global energy markets.

Sri Lanka is heavily dependent on imported fuel, and any instability in the Middle East — particularly involving a major oil producer like Iran — could push global crude oil prices upward.

Energy sector sources said rising oil prices would increase the cost of fuel imports and place additional pressure on the country’s foreign exchange reserves.

Higher global oil prices could also raise operational costs in the power generation sector, particularly for thermal power plants operated by the Ceylon Electricity Board, which relies on fuel and coal imports to meet electricity demand.

Analysts say increased fuel costs could eventually translate into higher electricity generation costs and additional financial pressure on the national power utility.

The tourism sector had entered 2026 on a strong recovery trajectory after attracting more than two million visitors last year, with authorities targeting three million arrivals this year.

However, industry experts caution that prolonged geopolitical instability in the Middle East could slow the momentum of Sri Lanka’s tourism recovery while simultaneously creating new challenges for the country’s energy sector.

Despite these emerging risks, officials remain cautiously optimistic that the impact will be temporary if tensions in the region stabilise in the coming weeks.

They stress that Sri Lanka continues to be viewed internationally as a safe and attractive destination, while authorities are closely monitoring developments in global energy markets and aviation networks.

By Ifham Nizam

Business

NDB raises Sri Lanka’s largest Basel III-Compliant Thematic Bond

Published

13 hours ago

2026/03/17

Sahan Weerasooriya

Kelum Edirisinghe - Director, Chief Executive Officer

National Development Bank PLC (NDB/ the Bank) recently announced that it successfully raised LKR 16.0 billion through the issuance of Basel III-compliant Tier II Rated Unsecured Subordinated Redeemable GSS+ Bonds (the GSS+ Bonds), to be listed on the Colombo Stock Exchange (CSE). This issuance marks a major milestone in thematic fundraising within Sri Lanka’s capital markets landscape, signaling the country’s growing progress in the increasingly important segment of sustainable finance.

The GSS+ Bonds issue opened on 10 March 2026 and was oversubscribed within the same day, demonstrating strong demand from both retail and institutional investors. This response reaffirms the confidence investors place in NDB and its overall financial strength and stability. The issuance of the GSS+ Bonds reflects the Bank’s strong environmental and social considerations embedded in its lending practices. For many years, NDB has maintained a robust Environmental and Social Management System (ESMS) ensuring that funds are directed toward environmentally and socially responsible projects and causes.

NDB’s GSS+ Bonds will be deployed to finance eligible Green (including Blue), Social, Sustainability, and Sustainability-Linked projects, supporting environmentally responsible, socially impactful, and sustainable economic development.

Business

HNB General Insurance fastest in reaching LKR 11 Bn. revenue (GWP) within 10 years of operations

Published

13 hours ago

2026/03/17

Sahan Weerasooriya

Stuart Chapman - Chairman / Sithumina Jayasundara –CEO

HNB General Insurance Limited (HNBGI) announced its financial results for the year ended 31 December 2025, marking a milestone year of accelerated growth, strengthened financial resilience, and sustained business momentum.

The Company recorded a Gross Written Premium (GWP) of LKR 11.0 billion for 2025, reflecting a robust 21% growth compared to LKR 9.1 billion in 2024. This performance significantly outpaced the industry’s growth of 15%, demonstrating the Company’s strong competitive positioning, disciplined execution, and continued customer confidence. With this achievement, HNBGI becomes the first general insurer in Sri Lanka to reach the LKR 11 billion GWP milestone within ten years of operations. The Company also improved its market position, moving up to 6th place from 7th in Sri Lanka’s general insurance sector.

The Fire segment emerged as a standout contributor with a 27% growth, reaching LKR 2.4 billion, while the Motor portfolio grew by 25% to LKR 6.0 billion. Marine recorded a steady 16% increase to LKR 378 million, and the Miscellaneous segment contributed LKR 2.2 billion. The broad-based growth across segments reflects HNB General Insurance’s balanced portfolio, effective distribution reach, and strong customer confidence.

The Company demonstrated its unwavering commitment to customers through timely and efficient claims management, committing LKR 2.5 billion towards Ditwa cyclone-related claims. In addition, a further LKR 4.7 billion was paid in claims across all other segments during the year, underscoring the Company’s financial strength and reliability in times of need.

The Company’s financial strength further consolidated during the year, with Total Assets growing by a significant 31% to LKR 13.38 billion, while Funds Under Management increased by 9% to LKR 6.74 billion. The Capital Adequacy Ratio remained well above regulatory requirements at 190%, reflecting a solid capital base to support future growth.