Business
Rupee volatility exposes deeper structural weaknesses, says fintech industry leader
The continued depreciation pressure on the Sri Lankan rupee is exposing deep-rooted structural weaknesses within the economy, while simultaneously creating limited opportunities for export-oriented sectors, according to Rajkumar Kanagasingam.
Kanagasingam warned that while some export industries may temporarily benefit from a weaker currency, the broader economic strain caused by rising import costs, inflationary pressures, and investor uncertainty continues to weigh heavily on businesses and consumers alike.
Speaking to The Island Financial Review, he said local industries are struggling to absorb rising costs linked to imported raw materials, machinery, fuel, and intermediate goods as the rupee remains under pressure.
“Local industries are coping through cost-cutting measures, selective price increases, tighter inventory management, and delaying certain capital investments,” he said. “Many businesses are also exploring alternative suppliers and improving operational efficiency to manage rising import-related costs.”
He noted that import-dependent sectors are among the hardest hit by currency depreciation, particularly construction, transport, pharmaceuticals, manufacturing, and food imports, where businesses face mounting operational expenses and shrinking margins.
At the same time, Kanagasingam observed that export-oriented sectors such as apparel, tea, IT services, tourism, and businesses promoting local substitutes may gain some competitive advantage from the weaker rupee, as foreign exchange earnings translate into higher rupee revenues.
“A weaker rupee can improve the competitiveness of export-oriented sectors by increasing rupee earnings from foreign exchange,” he explained. “However, the benefits may be partially offset by higher imported input costs, energy expenses, and broader economic pressures.”
He stressed that small and medium-scale enterprises (SMEs) remain significantly more vulnerable than larger corporates during periods of currency instability.
“SMEs generally have limited financial buffers, less access to foreign currency, and weaker bargaining power,” he said. “Larger corporates are typically better positioned to manage exchange rate fluctuations through stronger reserves, export earnings, and diversified financing options.”
Kanagasingam added that consumers are ultimately carrying much of the burden created by rupee depreciation, with higher prices increasingly visible across food, transport, utilities, imported goods, and daily services.
“In many cases, increased business costs are gradually passed on to consumers,” he said, warning that sustained currency weakness could continue to fuel inflationary pressure across the economy.
He also pointed to a growing shift among local manufacturers toward localization and import substitution as businesses attempt to reduce reliance on imported inputs.
“There is growing interest in strengthening domestic supply chains and local production,” he noted. “However, Sri Lanka still faces challenges in terms of industrial scale, technology, and the availability of locally sourced raw materials.”
According to Kanagasingam, persistent currency volatility also undermines investor confidence and complicates long-term industrial planning.
“Currency fluctuations create uncertainty for investors, particularly in areas such as pricing, financing, debt servicing, and long-term project planning,” he said. “Greater exchange rate stability generally improves investor confidence and supports long-term industrial growth.”
He urged policymakers and the Central Bank to prioritize macroeconomic stability, foreign reserve strengthening, export expansion, energy efficiency, and targeted support for SMEs in order to cushion the impact of exchange rate volatility.
“The priority should be maintaining macroeconomic stability, strengthening foreign reserves, supporting export growth, improving energy efficiency, encouraging local production, and providing targeted support for SMEs,” he said. “Consistent and predictable policy measures are also essential to strengthen investor confidence.”
Kanagasingam further cautioned that prolonged rupee depreciation could eventually lead to job losses in sectors heavily dependent on imports.
“Prolonged depreciation could place pressure on import-dependent industries, potentially leading to reduced production, delayed expansion, and job losses, particularly among smaller businesses and vulnerable sectors,” he warned.
Describing the current exchange rate situation as more than a temporary market adjustment, Kanagasingam said Sri Lanka must address its long-standing structural vulnerabilities if it hopes to achieve lasting currency stability.
“It reflects both short-term external pressures and deeper structural challenges within the economy,” he said. “These include high import dependence, limited export diversification, debt-related pressures, and the need for stronger foreign exchange generation over the long term.”
Economic analysts note that the rupee’s trajectory in the coming months will remain closely tied to external debt management, reserve accumulation, export performance, remittance inflows, and broader investor sentiment surrounding Sri Lanka’s economic recovery efforts.
By Ifham Nizam
The Securities and Exchange Commission of Sri Lanka (SEC) successfully hosted a series of high-level meetings of the International Organization of Securities Commissions (IOSCO), bringing together leading securities regulators and enforcement officials from around the world to discuss emerging regulatory challenges, strengthen international cooperation, and enhance collective efforts to combat cross-border securities market misconduct.
The meetings, held at the Hilton Colombo from 13 to 16 October 2026, included sessions of the IOSCO Enforcement and Cooperation Committee and its Screening Group (Committee 4/SG), as well as meetings of the Monitoring Group and the Steering Committee. The event attracted approximately 50 senior representatives from securities regulators and exchanges across several jurisdictions, including Australia, Japan, the United States, the United Kingdom, France, Italy, Canada, New Zealand, India, Germany, Belgium, Singapore, China and Spain, reflecting the global significance of the discussions and the growing importance of international regulatory collaboration.
Welcoming delegates to Sri Lanka, Senior Professor D.B.P.H. Dissabandara, Chairman of the SEC, emphasized the critical role of international cooperation in safeguarding market integrity and investor confidence in an increasingly interconnected financial landscape.
“No regulator can effectively address cross-border misconduct in isolation. The speed with which information, transactions and illicit activities can move across borders requires an equally coordinated and timely regulatory response. Strong international cooperation, effective information sharing and mutual trust among regulators are essential to maintaining fair, transparent and resilient capital markets,” he stated.
The discussions focused on a range of enforcement and cooperation matters, including mechanisms for enhancing cross-border information exchange, strengthening investigative collaboration among regulators, addressing increasingly sophisticated forms of securities fraud and market abuse, and promoting the effective implementation of international standards and best practices. Participants also exchanged experiences and insights on emerging enforcement challenges arising from technological developments, digitalization of financial services, and increasingly interconnected global markets.
IOSCO is recognized as the leading international body that brings together the world’s securities regulators and serves as the global standard setter for securities regulation. Through its policy work and cooperative initiatives, IOSCO plays a central role in promoting investor protection, ensuring that markets are fair, efficient and transparent, reducing systemic risk, and strengthening confidence in capital markets worldwide.
Sri Lanka has maintained a strong and active relationship with IOSCO for more than three decades. The SEC became an Ordinary Member of IOSCO in 1993 and has been a signatory to the IOSCO Multilateral Memorandum of Understanding (MMoU) since 2004. The MMoU is the internationally recognised benchmark for cooperation and information sharing among securities regulators and serves as a critical tool in facilitating cross-border investigations and enforcement actions.
Pan Asia Bank recently entered into a one-year Memorandum of Understanding (MOU) with Ideal Motors (Pvt) Ltd, creating a new financing avenue for customers purchasing vehicles from the authorised Mahindra dealer. The strategic partnership will enable customers of Ideal Motors to access leasing facilities from Pan Asia Bank, making vehicle financing more convenient while supporting their mobility and business requirements. The agreement also provides an opportunity for the Bank to expand its leasing portfolio and strengthen its presence in Sri Lanka’s vehicle financing market.
Ideal Motors is the authorised dealer for the Mahindra vehicle range in Sri Lanka, including the Mahindra Bolero CPU Truck and Scorpio Jeep/Pickup. The vehicles cater to a range of requirements, from commercial and business applications to personal mobility, making accessible financing an important part of the purchasing decision.
The Bank’s vehicle leasing facilities are designed to simplify the financing process, with convenient repayment options and professional support to help customers select a solution suited to their requirements. For customers, the arrangement brings vehicle selection and financing closer together, reducing the need to navigate the two processes separately.
“Our partnership with Ideal Motors enables us to bring financing closer to customers at the point of vehicle purchase. We remain focused on providing convenient and flexible leasing solutions that support both personal mobility and the needs of businesses,” said Naleen Edirisinghe, Director/CEO of Pan Asia Bank.
Pan Asia Bank and Ideal Motors will work closely during the one-year partnership to maximise business opportunities and deliver a seamless financing experience to customers. The collaboration is expected to strengthen both organisations’ ability to respond to demand for commercial and personal vehicles while creating greater value for customers.
Yohan Ebell, Head of Retail Credit, Pan Asia Bank, said: “Through this partnership, we aim to make vehicle financing simpler and more accessible, with leasing solutions designed to meet the varied requirements of Ideal Motors’ customers.”
The collaboration also reflects Pan Asia Bank’s commitment to building partnerships that make financial services more accessible and responsive to the needs of individuals and businesses.
Pan Asia Bank has established a growing presence in vehicle financing, offering leasing solutions designed around customer convenience and flexibility. Its leasing proposition is supported by a nationwide branch network and a customer-focused approach, enabling customers to obtain guidance on financing options while completing their vehicle purchase.
Heritance Hotels and Resorts has secured four distinguished titles at the World Travel Awards 2026, with three national awards recognising its Sri Lankan properties and an international title for Heritance Aarah in the Maldives.
The three Sri Lankan titles recognise Heritance Tea Factory as Sri Lanka’s Leading Heritage Hotel 2026, Heritance Ahungalla as Sri Lanka’s Leading Luxury Hotel 2026, and Heritance Kandalama as Sri Lanka’s Leading Wedding Hotel 2026. Heritance Aarah was named the Indian Ocean’s Leading All-Inclusive Resort 2026.
Internationally recognised within the global travel and tourism industry, the World Travel Awards celebrate excellence across hotels, resorts, and destinations. Recognition at this level affirms the quality, distinctiveness, and consistency of the experiences delivered by Heritance Hotels and Resorts.
Cabinet nod to amend the Sri Lanka Development Administration Institute Act No. 9 of 1982
Establishment of the National Higher Performance Centre
State patronage for the cremation ceremony of the late deputy prelate (Anu Nayaka Thero) of the Sri Laka Ramangya Maha Nikaya, Gatambe Rajopawanramadhipatha, Siri Chandawimala Wanshalankara, Chandrakeerthi Sri Amarawansha, Sadhdharmawageeshwara, Shasanashobhanna Most Venerable Keppetiyagoda Siriwimalabhidhana Thero
Implementation of Suraksha Student Insurance Program for the Year 2026/2027
Environmental laws will be enforced equally against everyone
President pays last respects to Most Venerable Kappetiyagoda Siri Wimala Thera
‘Dates have the highest sugar content to fight Coronavirus’
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