Business
Sri Lanka Development Update 2021 – World Bank Report
(Select extracts)
Amid the COVID-19 pandemic, Sri Lanka’s economy contracted by 3.6 per cent in 2020, the worst growth performance on record, as is the case in many countries fighting the pandemic. Swift measures enacted by the government in the second quarter helped contain the first wave of COVID-19 successfully, but these measures hit sectors like tourism, construction, and transport especially hard, while collapsing global demand impacted the textile industry.
Job and earning losses disrupted private consumption and uncertainty impeded investment. As a result, the economy contracted by 16.4 per cent (y-o-y) in the second quarter. The economy began to recover in the third quarter as the first wave was brought under control and containment measures were relaxed. The momentum continued in the fourth quarter as the economy was broadly kept open despite a second wave of COVID-19 infections.
The government took proactive measures to mitigate the impact of the pandemic. Despite limited fiscal space, resources were allocated (approximately 0.7 per cent of GDP) for health measures, cash transfers, and postponed tax payments. While public expenditures increased, revenues declined, resulting in a widening of the fiscal deficit in 2020. Due to the economic contraction and the elevated fiscal deficit amid COVID-19, public and publicly guaranteed debt is estimated to have increased to 109.7 percent of GDP. In line with the government strategy to reduce external debt over the medi- um-term, debt financing relied increasingly on domestic sources.
The Central Bank of Sri Lanka (CBSL) significantly contributed to the crisis response. It undertook considerable monetary policy easing, for which there was room given benign inflation, and additional measures to increase liquidity in the market and support businesses. It also introduced financial sector regulatory measures, like a debt moratorium for COVID-19 affected businesses and individuals.
However, despite these efforts, bank lending to the private sector remained low. By contrast, credit to the government and state-owned enterprises surged and accounted for 80 per cent of the total credit in 2020.
The pandemic likely exacerbated pre-existing financial sector vulnerabilities, although the full impact of COVID-19 cannot yet be observed. An improved trade balance and strong remittance inflows narrowed the current account deficit. A sharp drop in imports in 2020 more than offset the decline in exports. However, with financial inflows insufficient to meet external liabilities, reserves declined to an 11-year low in February 2021, before a currency swap worth US$ 1.5 billion with the People’s Bank of China was approved in March 2021. Due to a shortage of foreign currency, the exchange rate depreciated by 6.5 per cent from January through March 17, 2021.
The CBSL took several measures to preserve foreign exchange reserves and reduce pressures on the exchange rate. Growth is expected to recover to 3.4 per cent in 2021, mainly reflecting a base effect and FDI inflows. Gradually normalizing tourism and other economic activities as well as already signed investments will support growth. However, the subdued global recovery may dampen export demand. Over the medium-term, continued trade restrictions, economic scarring from the slowdown and the high debt burden may weigh on growth prospects.
Through an enhanced focus on an export-oriented growth model that taps the full potential of private investment, the country could realize its ambitions to increase its competitiveness and raise growth in a sustainable manner. The forecast is subject to both upside and downside risks. If the global economy recovers faster than expected and the global tourism industry rebounds more quickly with the progress on vaccination programs, the growth outlook could become more favorable.
On the other hand, downward risks persist, pertaining to debt and external sustainability given high debt and low external buffers, especially because the repayment profile requires accessing financial markets frequently. Given large refinancing requirements, constrained market access amid rating downgrades is a challenge. Thus, striking a balance between supporting the economy amid COVID-19 and ensuring fiscal sustainability is key. A reform program to provide a fiscal anchor could help Sri Lanka to reduce debt vulnerabilities and lower sovereign risk.
The COVID-19 impact on employment and poverty
The economic contraction in the wake of COVID-19 has reversed past progress, at least temporarily. Poverty is expected to have risen since the onset of the pandemic mostly due to widespread job and earning losses. Simulations suggest that job losses were more likely to occur in urban areas and among private sector and own-account workers. Job losses were concentrated in the lower-middle of the income distribution: workers most vulnerable to job loss are located between the 20th and 40th percentiles of the pre-pandemic earnings distribution.
Temporary absence from work and job losses occurred less frequently than declines in earnings. While informal workers are more likely to suffer earnings losses, formal workers have been affected as well, for example in the export-oriented apparel industry. With jobs lost and earnings reduced, the $3.20 poverty rate is projected to have increased from 9.2 per cent in 2019 to 11.7 per cent in 2020.
The poorest experienced the largest proportionate earnings shock while the smallest proportionate income losses were suffered by the richest. The latter tend to have formal, secure jobs and better access to digital technology that allows them to conduct wage work or business operations remotely. To mitigate the impact of the economic hardship on the poor and vulnerable, the government implemented several livelihood support programs, which helped to soften the labor market shock and the impact on poverty.
Further progress in restoring livelihoods and making them more resilient could help Sri Lanka to continue its path of poverty reduction and shared prosperity. The current social protection system could support the reintegration of those who lost their jobs. In the medium term, social safety nets could be better targeted toward the poor and vulnerable, and adjusted to allow for support to be scaled up quickly and effectively in times of crises. Unequal opportunities to work from home have introduced new economic and spatial divides as working remotely is nearly exclusively an option for high income earners, and small and medium-sized enterprises were unlikely to adopt digital technologies.
In the medium to long-term, digital technologies could become an important engine for job growth. However, despite wide scale ownership of cellphones in Sri Lanka, the digital revolution will fall short of expectations without expansion of high-speed networks and accessible data on the whole island. Sri Lanka could provide new opportunities for economic mobility through policies that expand or universalize access to digital infrastructure.
Investments in digital literacy are a prerequisite for widely shared benefits from these new opportunities.
Growth should recover gradually in 2021. The economy is expected to grow by 3.4 per cent in 2021, from a low base, as vaccination programs progress in Sri Lanka and its major trading partners.
Already-signed investments into the Colombo Port City and Hambantota Industrial Zone and gradually normalizing domestic economic activities should provide an impetus to growth. However, the momentum of the recovery is expected to be constrained due to: (i) subdued export demand and tourism, as well as lower remittances growth amidst the sluggish global recovery; and (ii) the challenging domestic macroeconomic situation. Continued import restrictions and the high debt bur- den will adversely affect growth and poverty reduction over the medium-term. Inflationary pressure is expected to materialize in 2021-2023 due to the partial monetization of large fiscal deficits. External buffers are expected to remain low, with subdued financial inflows and significant financing needs. The current account deficit is projected to remain low in 2021, with strict import restrictions largely offsetting relatively low garment exports and tourism receipts.
Courtesy – Sri Lanka
Financial Chronicle
The Colombo Stock Exchange (CSE), in collaboration with the Securities and Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), has embarked on a significant initiative to introduce the eXtensible Business Reporting Language (XBRL) for listed entities in Sri Lanka. This move is expected to transform the way financial data is submitted, analyzed, and disseminated within the capital market.
XBRL is a global standard for digital reporting, specifically for financial business data. XBRL is the universal language for business data reporting and standardizes communication of financial reporting. It enhances data accuracy, simplifies reporting, and allows for more effective analysis and faster comparison of financial information by businesses, regulators, researchers, investors, and other stakeholders.
The primary objective of this initiative is to streamline the submission of financial and non-financial information of listed companies set out in the Interim Financial Statements and Annual Reports by listed companies in compliance with the XBRL taxonomy, ensuring a more efficient and effective dissemination of financial data to the market. The XBRL taxonomy would be developed jointly with CA Sri Lanka and SEC.
The CSE formally marked the beginning of this journey by signing a contract agreement with Microvista Technologies (Pvt) Ltd, India on 9th April 2025, to develop the XBRL system. Microvista Technologies (Pvt) Ltd is a leading compliance platform provider in India possessing extensive experience in XBRL based financial reporting implementations. A demonstration of the proposed system was held at the CSE premises for 30 selected listed companies, representing the banking, insurance, and other sectors. This session provided companies with a first look at the system’s interface and functionality, followed by a Q&A forum to gather initial feedback. The CSE will conduct awareness sessions for Listed Entities through a structured engagement framework.
CSE intends to adopt a phased approach for the implementation of XBRL based financial reporting. In phase one, CSE plans to convert Interim Financial Statements into XBRL based digital financial reporting in early 2026. Upon successful adaptation of phase one by the listed companies, the CSE envisions expanding the scope of XBRL based financial reporting to Annual Reports by 2027 and the submission of Sustainability Reports by 2028.
The adoption of XBRL brings a multitude of benefits to listed entities and market stakeholders. Built-in validation tools help identify inconsistencies or omissions, while the automated system facilitates faster and streamlined financial reporting. Tagged data can be reused across multiple platforms and reports, reducing duplication in data entry and significantly lowering compliance costs.
The implementation of XBRL supports transparency and increases capital market efficiency by helping users of business and financial information locate relevant details. For example, companies reporting under a common taxonomy provide specific details that are immediately comparable by investors and analysts in investment decision-making. XBRL enables listed companies to switch resources away from costly manual processes, typically involving time-consuming comparison, assembly and re-entry of data. Instead, they are able to redirect more effort on analysis, supported by software, which can validate and manipulate XBRL information.
Compared to manual data entry and analysis, XBRL would increase the accuracy of information and enable more value-added analysis, review, and decision-making. It also enhances data analytics capabilities for both regulators and investors, while improving accessibility to a wider pool of international investors through cross-border comparability. XBRL filing provides a reduction in total costs over the long term. This can benefit the organization in various ways, such as improved investor relations, investor coverage, and access to capital markets. Since, XBRL is a widely accepted filing approach adopted by many jurisdictions, many foreign portfolio investors are already used to XBRL formats. As such, they would prefer financial statements published in XBRL for their analytical purposes.
This strategic initiative by the CSE reinforces their shared commitment to modernizing financial reporting infrastructure and aligning Sri Lanka’s capital market with international best practices in transparency, accuracy, and accessibility.
Investor sentiment at the CSE became more positive yesterday and the market moved to a very healthy position due to external market factors.Investors were more optimistic about the government’s efforts succeeding in negotiating with the US authorities to get a concessionary arrangement from US’ reciprocal tariff increase of 46 percent on US exports, market analysts said.
Amid those developments both indices moved upwards. The All Share Price Index moved up by 155 points, while the S and P SL20 rose by 38.9 points. Turnover stood at Rs 2.4 billion with seven crossings.
Those crossings were reported in JKH which crossed 8 million shares to the tune of Rs 160 million; its shares traded at Rs 20, Hemas Holdings 500,000 shares crossed to the tune of Rs 60.2 million and its shares sold at 120.50, Access Engineering 1.5 million shares crossed for Rs 60 million; its shares traded at Rs 40, Agarapathana Plantations 2.5 million shares crossed for Rs 41.2 million; its shares traded at Rs 16.50, Lanka IOC 300,000 shares crossed to the tune of Rs 39 million; its shares traded at Rs 130, Commercial Bank 212,000 shares crossed for Rs 29.1 million; its shares traded at Rs 137 and LB Finance 220,000 shares crossed for Rs 20.4 million; its shares sold at Rs 93.
In the retail market top six companies that mainly contributed to the turnover were; Sunshine Holdings Rs 177 million (7.6 million shares traded), JKH Rs 123 million (6.1 million shares traded), Swisstec Rs 116 million (2.3 million shares traded), Access Engineering Rs 100 million (2.1 million shares traded) Agarapathana Plantations Rs 100 million (6.1 million shares traded) and Hemas Holdings Rs 96 million (804,000 shares traded).During the day 125 million shares volumes changed hands in 17000 transactions.
It is said that manufacturing sector counters led the market, especially with JKH, while services sector and plantations sector counters performed well too.
Yesterday, the rupee opened stronger at Rs 299.60/80 to the US dollar in the spot market dealers said, while bond yields continued to fall.
The expectation of some sort of resolution to the US- China trade conflict was contributing to the positive momentum, dealers said.
Excess liquidity was also coming back to the market, after a festival drawdown.
A bond maturing on 15.12.2026 was quoted at 8.90/9.00 and closed at 8.85/98 percent down from 8.88/9.00 percent Wednesday.
By Hiran H Senewiratne
Business
Uber supported economic growth in Sri Lanka with LKR 160 billion of economic activity in 2024: Report
Uber has released findings from its 2024 Sri Lanka Economic Impact Report, compiled by global policy research firm Public First. The report highlights how Uber and Uber Eats together contributed LKR 160 billion in economic activity last year—underscoring their growing role in delivering flexible earning opportunities, expanding access to safer, affordable transportation, and helping local businesses reach more customers.
Uber has transformed the way people travel and order food, groceries and more, over the last few years. By making transportation and delivery services safer and accessible, the company has helped generate economic growth at a time when Sri Lanka has been emerging from financial uncertainty.
Uber’s operations are fueling far-reaching economic benefits across Sri Lanka. In 2024, the platform generated LKR 338 billion in consumer surplus and LKR 16 billion in added tourism value, while drivers and delivery partners reinvested LKR 660 million into local maintenance services. These figures reflect how Uber’s ecosystem is stimulating secondary markets and enabling value far beyond the digital space.
Complementing this economic uplift, Uber has empowered drivers with more stable incomes, and given 70% of them a crucial buffer during tough times. Uber Eats helped local merchants generate LKR 3.6 billion in new business, while affordable transport options allowed thousands of users to save time, budget, and enjoy safer journeys—even during emergencies.
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