Business

Sri Lanka needs ‘bridge financing’ to last next six months, says Indrajit Coomaraswamy

Published

4 years ago

2022/04/4

by Sanath Nanayakkare

Sri Lanka needs to take steps on getting to a framework programme with the IMF, restructure its external debt and bring some bridge financing to last for next six months until negotiations with the IMF on external debt is completed,”former central bank governor Dr. Indrajit Coomaraswamy said recently, at a forum hosted by CT CLSA.

“IMF won’t be able to transact with Sri Lanka until we fix the unsustainable situation in the country,” he said.

Dr. Coomaraswamy highlighted the fact that IMF may include fiscal consolidation in a programme of debt restructuring for Sri Lanka.

CT CLSA, a leading capital market service provider that offers investment banking, stockbroking and wealth management services , conducted the forum on the timely topic ‘ The IMF and the Order of Priorities for Reforms.”

Elaborating on the topic, he said, “In fact, we have a solvency problem on our external debt. Trying to treat it as a cash flow problem and addresing it with short-term measures may create a bigger problem. However, we are beginning to see light at the end of the tunnel due to the policy measures taken by the government recently. Now having approached the IMF, and the government considering some external debt restructuring; we are shifting to the right path, but this is going to be tough.”

“Interest rates are about to rise. As per previous levels where inflation was high, 91-day treasury bill yield was 16%, SLFR was 12% and SDFR was 10.5%. According to former deputy governor of the central bank, Dr. W. A. Wijewardena, the interest rates are expected to double from the current levels.”

Responding to a question on the upward movement of the exchange rate, he said, “I think we could have taken measures to reduce the imbalance between demand and supply of foreign exchange before letting the exchange rate float.”

Referring to domestic debt, Dr. Coomaraswamy said,”We should not suggest or ever take into consideration to restructure our domestic debt. If we restructure the domestic debt, it will lead to serious undermining of the stability of the financial system. Such a situation may not help Sri Lanka in meeting its commitments with external creditors.”

“In fact, the crisis was two years in the making from the time the government cut taxes after the presidential election The country’s banking system is highly exposed to sovereign debt because in recent years, the banking system provided for bridging the budget deficit of the country. And therefore, if there is any restructuring of domestic debt, the impact of such a move could spill over to the balance sheets of the banks and would likely create a crisis in the financial sector. And some of the banks would be affected in the event of external debt restructuring. However, this effect could be managed through regulatory programmes of the central bank. The only way to solve this problem on a sustainable basis is to create a primary surplus in the budget,” he emphasised.

“All creditors of Sri Lanka would seek equality of treatment, and therefore, multilateral debt; namely, World Bank, ADB and the little bit of IMF debt should not be restructured. If it were to be restructured, those institutions could stop their operations in Sri Lanka, and even their financing in the pipeline may not be disbursed.”

“Bilateral debt, mainly OECD which is West + Japan are part of the Paris Club. As China and India are not part of the Paris Club, one of the possibilities for us is to see whether we are eligible for B20 framework earmarked for low-income countries. [B20 proposes to consider the issue of public debt management within the international financial architecture reform].

Dr. Dushni Weerakoon, the Executive Director of the Institute of Policy Studies of Sri Lanka (IPS) was also a panelist at the CT CLSA forum.

When she was asked how Sri Lanka should put the reforms in a particular order to be implemented, she said,”We no longer can afford sequential reforms. What is most critical for Sri Lanka in terms of its economic outlook is to gain some sense of macro stability as a first priority.”

“We are currently witnessing a clear shift in policy. We have to work on several fronts simultaneously with well-coordinated action on three fronts; namely, monetary policy front, exchange rate front and fiscal front. We have entered a monetary policy tightening cycle. The moves of the central bank led to a market-driven exchange rate. But the fiscal side is missing. As long as this is neglected the progress made on monetary and exchange rate fronts will not bring stability. This will put pressure on other two fronts.”

“There is slowness on fiscal adjustment maybe because it’s difficult to do it. Fiscal adjustment will require to raise taxes on the revenue side, and the spending side will require to freeze expenditures. Clear communication of these reforms to the general public is important as these changes should not create more social unrest. The way to do this could be that greater sacrifices would have to be made by those who have greater ability to pay taxes. The richer segment of the Sri Lankan population may have to bear a larger burden of the tax adjustments”.

“On the expenditure side, government spending may have to be frozen and public sector wages and salaries may also have to undergo changes. In such a context, there will be the need to try as much as possible to provide social safety nets for needy segments. It could be provided by implementing a cash transfer programme to reduce the potential social unrest.”

“The other reforms include State Owned Enterprise (SOE) reforms, labor market reforms and banking sector reforms,” she said.

When asked about the possible scenario of debt restructuring with debt to equity swaps, she said,” The possible cost of that is; you will face a prolonged negotiating process with the threat of legal action on the country. Unlike in the past, now our creditor landscape is huge. Our creditors are mostly based in the U.S., and then we have bilateral debt providers such as China and India. we will have to bring all these stakeholders to a common ground and ensure equality of treatment.”

“Another risk is that we need to know that the bonds issued by Sri Lanka has clauses where the majority of the bond holders can buy the minority. If not, there could be a hold off problem where we may have to face legal consequences.”

“The recent debt restructuring of Ecuador and Argentina only had restructuring of interest rate adjustments and maturity extensions and did not receive a haircut,” she pointed out.

Sri Lanka for the first time in 63 years achieved a Rs. 21.9 billion surplus in the primary balance of the fiscal account during the first 10 months of 2017. The country recorded a primary surplus of 0.6 percent of GDP in 2018, the second year running. Dr. Indrajit Coomaraswamy was the governor of the central bank at that time.

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Business

LankaPay Technnovation Awards to spotlight inclusive FinTech as digital payments expand across Sri Lanka

Published

22 hours ago

2026/02/27

Thilina Walpola

(L-R) - Dinuka Perera – DCEO LankaPay; Channa de Silva – CEO LankaPay; Rajeeva Bandaranaike – Chairman of the Panel of Judges; Vasantha Alwis, Director – Payments and Settlements of the Central Bank of Sri Lanka; and Indrajith Boyagoda – Secretary General, Sril Lanka Bankers’ Association.

Sri Lanka’s digital payments revolution is gathering unprecedented momentum, with more than 260 government institutions now integrated into the national digital payments ecosystem, marking a decisive shift toward financial transparency, efficiency and inclusion, officials said at a press briefing held at the Hilton Colombo Residences.

The announcement coincided with the launch of the eighth edition of the LankaPay Technnovation Awards 2026 by LankaPay, Sri Lanka’s national payment network, under the theme “Inclusive FinTech,” recognising financial institutions, fintech companies and government entities that have expanded access to secure and convenient digital financial services across the country.

Chief Executive Officer of LankaPay, Channa de Silva, said the rapid expansion of digital payment adoption reflects a structural transformation in Sri Lanka’s financial architecture.

“The growth we are witnessing in digital payments is not merely technological progress—it represents a fundamental shift in how financial services are delivered and accessed. Our national payment infrastructure is enabling real-time, secure and inclusive transactions that empower individuals, businesses and government institutions,” de Silva said.

He said LankaPay’s continued investment in interoperable and accessible payment infrastructure is helping bring more citizens into the formal financial system while strengthening economic governance.

“Our objective is to ensure digital payments are accessible to all Sri Lankans, from urban centres to the most remote communities. Inclusive digital finance strengthens economic participation and supports sustainable national development,” he said.

Officials said the onboarding of 260 government institutions within a year represents a remarkable leap from just eight institutions previously connected, underscoring the State’s accelerating digital transformation agenda.

“This expansion required extensive engagement across the country. Our teams worked directly with government departments, municipal councils and regional authorities to ensure successful integration into the digital payments ecosystem,”

LankaPay officials said, noting that institutions from regions including Kurunegala, Jaffna and Trincomalee had recently been onboarded.

Authorities said the digital integration of government services improves transparency, reduces administrative inefficiencies and enhances public convenience, while enabling better financial oversight and accountability.

The LankaPay Technnovation Awards, first introduced in 2017, have become Sri Lanka’s benchmark platform recognising excellence and innovation in payment technology, honouring institutions that have demonstrated leadership in advancing digital payments and financial inclusion.

The grand awards ceremony is scheduled to be held on March 24 at the Cinnamon Life under the patronage of Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka, as Chief Guest. Eranga Weerarathne, Deputy Minister of Digital Economy, and Hans Wijayasuriya, Chief Advisor to the President on Digital Economy, will attend as Guests of Honour.

Officials said the awards recognise outstanding achievements across multiple categories, including financial inclusivity, customer convenience, digital government payments and cross-border payment enablement, reflecting the breadth of innovation taking place within Sri Lanka’s financial services sector.

By Ifham Nizam

Business

HNB supports Sri Lanka’s recovery with record advances growth

Published

22 hours ago

2026/02/27

Thilina Walpola

HNB Group delivered strong performance in 2025, with Group Profit After Tax (PAT) reaching Rs 49.8 Bn, reflecting the continued progress. The Bank’s PAT stood at Rs 45.4 Bn, supported by robust balance sheet expansion and sustained improvements in asset quality.

Commenting on the performance, Nihal Jayawardena, Chairman of HNB PLC, stated,”The year 2025 marked a decisive shift in Sri Lanka’s economic trajectory, supported by improving macroeconomic fundamentals, renewed private sector confidence, and continued progress in national reform efforts. HNB’s strong balance sheet expansion, disciplined risk management, and sustained investment in digital and operational capabilities position the Bank to play an essential role in supporting the country’s revival”.

“While the year concluded with the severe impact of Cyclone Ditwah, the resilience demonstrated by communities and institutions underscored the importance of a banking sector that remains agile, responsive, and deeply committed to national progress. We will continue to work closely with stakeholders to mobilise capital, rebuild affected livelihoods, and strengthen long‑term economic stability.”

Despite strong credit growth, net interest margins remained under pressure amid an accommodative monetary policy stance. Net Interest Income declined marginally by 0.6% year‑on‑year, reflecting the broad reduction in market interest rates, and the recognition of a portion of overdue interest from the restructuring of Sri Lanka Sovereign Bonds (SLSBs) in December 2024, which temporarily boosted interest income in the previous year. However, the decrease in net interest income was moderated by the increase in interest income from loans and advances, supported by the expansion in the loan book, and the growth in CASA deposits.

Non-fund-based income provided a strong counterbalance, with Net Fee and Commission Income increasing by 28.9% year-on-year on the back of higher card usage and a sharp increase in digital transactions. The significant increase in the demand for trade related services on the back of the reopening of vehicle imports and improving trade activity, saw trade finance emerge as one of the key contributors to non-fund income in the current year. Furthermore, Exchange income rose to Rs 6.3 Bn during the year, reversing the loss of Rs 2.9 Bn recorded in 2024.

Prudent risk management, disciplined underwriting and focused recovery efforts supported a significant improvement in asset quality during the year. The Stage 3 portfolio recorded a net reduction alongside an impairment reversal of Rs 9.2 Bn, following the recognition of Rs 2.2 Bn in post‑model adjustments made prudently for loan exposures with potential vulnerability arising from Cyclone Ditwah.

Business

HNB Assurance delivers industry leading 42% revenue (GWP) growth and 28% rise in profits (PAT)

Published

22 hours ago

2026/02/27

Thilina Walpola

HNB Assurance PLC reported an outstanding financial performance for the year ended 31st December 2025, delivering a 42% year-on-year growth in Life Insurance Gross Written Premium (GWP), this along with the growth rate in Renewals are the highest in the industry.

Life GWP reached Rs. 19.49 Bn compared to Rs. 13.71 Bn in 2024, reflecting strong New Business generation and Renewal Collection. Net Written Premium grew even faster at 43% to Rs. 18.44 Bn, highlighting the quality and sustainability of the Company’s topline expansion.

Commenting on the results, Chairman Stuart Chapman stated, “The year under review was marked by gradual macroeconomic stabilisation, improved investor sentiment and a more predictable policy environment. Although the economy continues to recover from prior volatility, we are beginning to see renewed financial confidence among individuals and businesses. Against this backdrop, HNB Assurance has delivered strong growth in both revenue and profits, while maintaining robust capital adequacy and prudent risk management. Our improvement in top line, profitability and balance sheet strength demonstrates the resilience of our business model and our ability to navigate changing economic conditions which are reflected in an ROE which increased to 18.5% from 16.9% a year earlier.”

Profit Before Tax increased by 28% to Rs. 3.03 Bn from Rs. 2.36 Bn in the previous year, while Profit After Tax (including Life Surplus Transfer) rose by 28% to Rs. 2.12 Bn compared to Rs. 1.66 Bn in 2024. Earnings Per Share improved by 28% to Rs. 14.15 from Rs. 11.04, reinforcing the Company’s ability to consistently translate business growth into enhanced shareholder value. In line with this strong performance, the Board of Directors has proposed a first and final dividend of Rs. 5.00 per share for 2025, representing a 28% increase over the Rs. 3.90 per share declared in the previous year.