Business

‘A coupon system that enforces quotas and rationing will not solve the balance of payments problem’

Published

4 years ago

2022/01/1

The media has reported that the government intends to implement a system of quotas for imports and the rationing of food and fuel. This is the latest in the long list of interventions over the last two years to address the growing balance of payments problems. Similar to previous measures this too only addresses the outward manifestation of a larger problem in the economy, but not its origin. Therefore, this policy measure too will ultimately prove futile.

The government took the right step a couple of months ago when they withdrew price controls on a few selected goods in the markets. Instead of further quotas and controls, what is needed now is to withdraw from further interventions in the financial and foreign exchange markets.

Sri Lanka has imposed an ever increasing web of controls on imports since April of 2020 but the trade deficit remains stubbornly high. In the period January-October 2021 imports rose by 26.5% and the overall trade balance grew by 34% to $-6,498m. This is despite a strong performance by exports, which rose 22.1%. The issue is not with exports but with imports caused by excess demand within the economy.

The government is running an extremely loose monetary policy, artificially holding down interest rates through interventions by the Central Bank. They are also running a large fiscal deficit, financed by Central bank credit or money printing. It is these two factors that are fueling domestic demand and as a result the spiral in imports. Curing the malady requires addressing its root, any other solution will at best only provide temporary relief.

Quotas and rationing – this is what a coupon system entails are cumbersome and costly to implement. They are also prone to corruption. Rationing will inevitably create black markets as coupons obtained by those best placed to acquire them are traded.

Existing import restrictions are hurting domestic trade, exports and consumers who face rising prices as a result of the shortages. People often characterise movement towards a larger trade deficit as “worsening,” this terminology is flawed and reflects a failure to appreciate that both imports and exports are beneficial for the smooth function of an economy.

Buying goods and services more cheaply than it costs to produce them at home, the nation benefits from imports. By selling goods and services in world markets, at higher prices for them than it could earn by selling only at home it benefits from exports.

What a country can produce is determined by the available resources. This also determines the standard of living of a country. Given the limitation of a fixed set of resources, if a country attempts to produce every single item that it needs it may not be very efficient in the way it utilises scarce resources. Shutting itself off from imports restricts the available inputs to local production.

There may be some things that can be produced efficiently while there may be others that do less well. It makes sense to allow a country to produce the things that it has a relative advantage at producing, and import what it does not. Thus imports are necessary for the growth of exports.

The proposed imposition of quotas will damage the economy even further and increase the suffering of citizens. The government needs to address the fundamental problem; tighten monetary and fiscal policy, free the currency and draw up a proper recovery plan that can prevent even further deterioration.

This will undoubtedly cause a shock – but will then allow trade and economic activity to resume. The alternative however is far worse; suppressing the symptoms of the disease will also stifle economic activity resulting in a slow, certain impoverishment with no hope of growth.

Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.

Advocata spokespersons are available for live and pre-recorded broadcast interviews via 077 4858401

CONTACT:

Yasodhara Kariyawasam

Communication Manager, Advocata Institute

Email: yasodhara@advocata.org

All News Advertisement

Business

Sri Lanka’s midnight fuel price hike sparks frustrations amidst claims of broken assurances

Published

10 hours ago

2026/03/11

Sahan Weerasooriya

The government’s decision to raise fuel prices at midnight on March 9 has drawn criticism from observers who say the move contradicts earlier assurances that prices would remain stable for at least a month due to sufficient reserves already imported.

The surprise revision in fuel prices has triggered public concern and renewed debate over the government’s fuel pricing policy, with critics accusing authorities of misleading the public about the stability of supply and prices.

Officials had earlier sought to calm fears of potential shortages or sudden price increases, insisting that the country had adequate fuel stocks secured through prior imports. However, the latest price hike has raised questions about the reliability of those assurances.

Economic analysts say the development reflects the continuing vulnerability of Sri Lanka’s fuel market to global price volatility and geopolitical tensions affecting energy supply chains.

Aminda Methsila Perera, an economics professor at Wayamba University of Sri Lanka, said the latest move raises broader questions about the transparency of the government’s pricing strategy.

“The question arises whether the government is following a grey-market policy in this regard,” Prof. Perera said, suggesting that the manner in which prices are adjusted may not fully reflect a transparent or predictable formula.

Meanwhile, directors of the state-run Ceylon Petroleum Corporation (CPC) defended the decision, saying the increase was a pre-emptive measure aimed at cushioning the country from steeper price shocks in the near future.

A CPC director argued yesterday that implementing a moderate price revision now would allow authorities to manage potential increases more effectively should the international situation deteriorate further.

Meanwhile, an analyst said that the move was intended to preserve the financial stability of the CPC and its bottom line although President AKD had said in parliament that the Treasury had enough funds to mitigate global shocks.

However, they say the abrupt nature of the midnight announcement risks undermining public confidence, particularly after repeated assurances that prices would remain unchanged in the short term.

With global energy markets remaining volatile, analysts warn that further price adjustments cannot be ruled out if international crude prices continue to climb or if regional supply disruptions intensify.

Meanwhile, an economist said that with the unfolding scenario, many Sri Lankans already grappling with the rising cost of living, have been tossed to the fire from the frying pan.

By Sanath Nanayakkare

Business

Women-only screening of “Gahanu Lamai” for International Women’s Day 2026

Published

10 hours ago

2026/03/11

Sahan Weerasooriya

In celebration of International Women’s Day 2026, Havelock City Mall (HCM) hosted what is believed to be one of Sri Lanka’s first women-only cinema screenings, presenting a culturally significant and deeply meaningful tribute to womanhood.

Held at Scope Cinemas, Havelock City Mall, the exclusive event featured a complimentary screening of the iconic Sri Lankan film Gahanu Lamai, and welcomed an audience comprising corporate invitees, celebrities, female staff of Havelock City Mall, and winners of a special social media contest.

The occasion was further distinguished by the presence of Dr. Ranee Jayamaha, Chairperson of Overseas Realty (Ceylon) PLC, who graced the event and added significance to this special celebration.

Guests arrived dressed in purple, the internationally recognised symbol of dignity, solidarity, and justice, reinforcing the spirit and symbolism of the occasion. Through the screening of Gahanu Lamai—the acclaimed work of the late Dr. Sumitra Peiris, Sri Lanka’s first female film director—Havelock City Mall created a platform for reflection on the enduring cultural and contemporary relevance of women’s stories.

Commenting on the initiative, Mrs. Avanthie De Zoysa, Assistant General Manager of Havelock City Mall, stated:

“As a female manager of this organization, I am incredibly proud of this initiative. It is a heartfelt gesture of appreciation for the women who contribute so tirelessly to their families, to our society, and to the country at large. We wanted to provide a space that wasn’t just about celebration, but about acknowledging the profound impact women have in every sphere of life.”

Business

Novus Technologies joins LankaPay Technovation Awards 2026 as Platinum Sponsor

Published

10 hours ago

2026/03/11

Sahan Weerasooriya

Novus Technologies has announced its partnership as the Platinum Sponsor for the LankaPay Technovation Awards 2026, reaffirming its commitment to driving innovation, financial inclusion, and the future of fintech in Sri Lanka.

Organised by LankaPay (Private) Limited, the LankaPay Technovation Awards has emerged as a premier industry platform recognising institutions that are spearheading digital transformation across the country.

The initiative celebrates banks, financial institutions, and technology providers that are enhancing customer experience through secure, efficient, and inclusive digital payment solutions.

Industry analysts note that the awards have played a pivotal role in strengthening Sri Lanka’s fintech ecosystem by encouraging competition, innovation, and collaboration among stakeholders.

Over the years, the platform has highlighted advancements in real-time payments, mobile banking, and integrated digital financial services, supporting the broader national agenda of building a digitally empowered economy.

Novus Technologies, a leading technology solutions provider to the banking and financial services sector, said its sponsorship reflects its long-standing dedication to accelerating the adoption of digital financial services and enhancing technological capabilities across the industry.

“As Sri Lanka continues its digital transformation journey, it is vital that we collectively foster innovation while ensuring security and inclusivity within the financial ecosystem,” a spokesperson for Novus Technologies said.

“Supporting initiatives such as the LankaPay Technovation Awards aligns with our mission to enable next-generation fintech solutions that empower institutions and customers alike.”

The awards ceremony is expected to bring together senior banking executives, fintech leaders, policymakers, and technology innovators, offering a platform to recognise excellence and share insights on emerging trends shaping the future of digital finance in Sri Lanka.

Novus Technologies is a forward-thinking technology solutions provider specialising in delivering innovative, secure, and scalable solutions to the banking and financial services industry.

With a strong focus on digital transformation, system integration, and next-generation fintech solutions, the company continues to play a key role in shaping Sri Lanka’s rapidly evolving digital landscape.

By Ifham Nizam