Business

Belated economic reforms: Lankans to swallow more ‘painful medicine’

Published

4 years ago

2022/05/2

Failure to implement required policy reforms at this critical juncture will be very costly, the Ministry of Finance says.

‘Accumulated issues in the past have now exploded

‘Time has come to put the house in order’

‘Dismal fiscal sector has caused imbalances in the macro-economy’

‘Engagement with IMF, a starting point in implementing critical reforms’

by Sanath Nanayakkare

The Ministry of Finance (MOF) said last week that Sri Lanka urgently needs to undertake difficult, but much needed and far-reaching reforms to address the accumulated and persistent issues in the country’s fiscal sector.

In a report titled ‘Fiscal Sector: Present Situation and Way Forward’, MOF pointed out that dismal fiscal sector performance has caused many imbalances in the macro-economy.

“Exceptionally low tax revenue, rigid recurrent expenditure, a large budget deficit, an accumulated and now unsustainable debt are the key concerns in the fiscal sector. Responsible and disciplined fiscal management has become more important than ever. In this process, the country and its citizens will have to go through a period of difficulty,” MOF warned.

The report further said:

“A strong social protection network is required for the vulnerable and needy segments as reforms will be painful.”

“The time has come to put the “house in order” and revamp the government’s fiscal operations to strengthen macroeconomic stability and facilitate economic growth in the medium to long term.”

“Deficit financing poses a critical challenge due to the shortfall of foreign financing following the loss of international capital market access. The resulting rise in monetary financing has caused severe macroeconomic imbalances.”

“The dismal performance of the fiscal sector over the years has contributed to macroeconomic instability and failed to support long-term growth. The excess aggregate demand generated by unsustainable fiscal deficits has resulted in elevated inflation, pressure on the balance of payments (BOP) and currency volatility.”

“Sri Lanka today is facing a severe BOP crisis with insufficient foreign exchange to buy essential imports such as food, energy,and pharmaceuticals, let alone meeting its debt service obligations. Sound macroeconomic fundamentals cannot be achieved without prudent and sustainable fiscal outcomes.”

“Accumulated issues in the past have now exploded and caused severe disruptions to the day-to-day lives of Sri Lankans, leading to widespread public displeasure and social unrest.”

“The fiscal sector performance in the recent past is characterised by exceptionally low government revenue, rigid recurrent expenditure, high budget deficits, and accumulated debt which is now unsustainable. The weak fiscal position has manifested in credit rating downgrades, loss of access to international capital markets and foreign financing. As a result, the government has increasingly relied on domestic financing of the budget, including monetary financing by the Central Bank, in turn leading to significant macroeconomic imbalances.”

“Government revenue declined particularly sharply in the last two years due to various reasons including the economic downturn caused by the COVID-19 pandemic, import restrictions imposed to ease the external sector pressure, but

most importantly, due to the ultra-low tax regime introduced in late 2019 and COVID-19 related easing measures in early 2020. Even before these tax cuts, Sri Lanka was a country with one of the lowest revenue-to-GDP ratios in the world, and the tax cuts drove Sri Lanka closer to the bottom of this list.”

“The government’s decision to seek the assistance of the International Monetary Fund (IMF) will be a starting point and a catalyst in implementing these critical reforms with the support of the citizens and other stakeholders.”

While acknowledging the fact that government fiscal operations have played an important role in improving economic and social conditions in Sri Lanka during its post-independence history, MOF went on to say that, “Failure to implement required policy reforms at this critical juncture will be very costly. However, it will lay a strong foundation to create a resilient economy for future generations.”

Central Bank Governor Dr. Nandalal Weerasinghe said on Friday that the Central Bank has taken measures required to stabilize the economy by taking the right monetary policy measures in terms of price adjustments and by increasing policy rates.

“Now, the fiscal side also needs implementing critical measures such as increasing state revenue by way of raising taxes. There is complete understanding on improving macro-economic fundamentals and decisions will be made to address the BOP issue, debt sustainability and enhancing state revenue in order to turn around the economy to a more resilient one,” he said.

The Governor noted that sooner the social and political stability were restored, the better it would be for stabilizing the economy and shifting it to growth path.

In September 2020, responding to a downgrade in credit ratings from Moody’s, a global rating agency, from a B2 to a Caa1, Sri Lanka’s Finance Ministry hit back claiming that such a report was ‘unwarranted, premature and reckless’.

In November 2021, former governor of the Central Bank Ajith Nivard Cabraal said that debt restructuring was underway without assistance from IMF and said, “We have to manage our debt without using the word ‘restructuring’ in a frivolous manner.”

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Business

Fifty ninth ADB Annual Meet opens in Samarkand amid global uncertainty

Published

16 hours ago

2026/05/4

Thilina Walpola

Guests from member countries of the ADB arrive at the venue for the 59th Annual Meeting of the Bank in Samarkand, Uzbekistan, yesterday

The 59th Annual Meeting of the Board of Governors is set to commence this week, bringing together finance ministers, central bank governors, policymakers and development leaders from across Asia and beyond at a time of mounting global economic and geopolitical uncertainty.

Addressing journalists ahead of the opening sessions, Bernard Woods, Principal Director of the Department of Communications, said the meetings were beginning at a pivotal moment for the world, with fuel markets, food security and fertilizer supply chains coming under strain due to tensions in the Middle East.

He noted that amid rising political and economic fragmentation, regional connections and stronger collaboration have become more important than ever. Against that backdrop, the key sessions and high-level discussions in Samarkand will focus on building collective resilience and strengthening cooperation among member countries.

Among the major themes expected to dominate the agenda are cross-border digital connectivity, cyber security, energy integration, capital market development, transport corridors and the responsible adoption of artificial intelligence to improve resilience and productivity in member economies. Woods also said discussions would examine how resources can be distributed more effectively to meet the unique development priorities of each country.

The official programme features a series of strategic seminars and media events over four days. The opening session of the Board of Governors will include addresses by high profile authorities and subject experts.

Other key sessions include discussions on how capital markets can drive development across Asia and the Pacific, scaling up investments for critical minerals and manufacturing value chains, digital highways for inclusive growth, and pan-Asia transport and power connectivity initiatives.

ADB President Kanda is also scheduled to hold a press conference to announce major new initiatives, while several technical briefings will examine global value chains, private sector operations, digital transformation and regional energy cooperation.

With global shocks increasingly spilling across borders, the Samarkand meeting is expected to underline a central message: that regional cooperation, practical partnerships and timely investment remain essential for sustaining growth and stability across Asia and the Pacific.

By Sanath Nanayakkare in Samarkand, Uzbekistan

Business

Nations Trust Bank completes transfer of HSBC Sri Lanka’s Retail Banking Business to its portfolio

Published

16 hours ago

2026/05/4

Thilina Walpola

Nations Trust Bank PLC (NTB) has announced that the transfer of Hongkong and Shanghai Banking Corporation’s (HSBC) Retail Banking business in Sri Lanka to NTB has officially been completed, with the acquired portfolio transitioning to NTB effective 1st May 2026.

NTB has integrated HSBC Sri Lanka’s retail banking customers into its operations, ensuring continuity of service and relationship management. The transition also includes the onboarding of HSBC Sri Lanka staff as part of the integration process. The transition has been carried out with a focus on operational stability and minimal disruption, with ongoing support in place as customers familiarise themselves with their banking arrangements at NTB.

The migration brings approximately 200,000 retail customer accounts under NTB, encompassing savings and current accounts, fixed deposits, credit and debit cards, retail loans and a high‑net‑worth customer segment that now joins Nations Trust Bank Private Banking. Through this transfer, Nations Trust Bank’s countrywide network expands to 96 branches. The transition adds seven branches to the network, with locations in Bambalapitiya, Flower Road, Union Place, and Pelawatte operating as dedicated Private Banking Centres, while three other branches are located in Nugegoda, Jaffna, and Kandy.

To support customers during the transition period, NTB has ensured that multiple access points and support channels remain available. Customers may continue to bank through the nearest NTB branch, contact NTB’s 24-hour Help Desk via +94 11 441 4151, and access digital banking services through the Nations Direct mobile app. Dedicated transfer‑related information and FAQs are also available at https://migration.nationstrust.com

Additionally, arrangements were made to extend branch support across two weekends as part of the transition programme.

Business

Amana Takaful named Sri Lanka’s Most Awarded Insurance Company

Published

16 hours ago

2026/05/4

Thilina Walpola

(L) Siva Karthigun, Chief Executive Officer – General and Gehan Rajapakse, Chief Executive Officer – Life

Amana Takaful Insurance has been recognized as Sri Lanka’s Most Awarded Insurance Company for 2026 by LMD Magazine, marking its third consecutive year of achievement. This recognition reflects the company’s consistent focus on delivering value across both its Life and General businesses, supported by customer-centric solutions, operational discipline, and continued innovation.

Over the years, Amana Takaful has strengthened its market position by enhancing service delivery, investing in digital capabilities, and expanding access to insurance solutions for a wider segment of Sri Lankans.

Commenting on the recognition, Siva Karthigun, Chief Executive Officer – General, stated: “This recognition reflects the discipline and focus we maintain across our operations to deliver consistent outcomes for our customers. Our continued investments in process improvements, digital capabilities, and service excellence have enabled us to strengthen our responsiveness and reliability, ensuring we meet the evolving expectations of our customers across all touchpoints.”

Commenting further, Gehan Rajapakse, Chief Executive Officer – Life, stated: “This recognition reflects the consistency of our efforts in delivering meaningful value to our customers, while continuously strengthening our capabilities across both Life and General businesses. As we move forward, our focus remains on enhancing accessibility, leveraging digital innovation, and ensuring our solutions remain relevant to the evolving needs of Sri Lankans, while maintaining the highest standards of service and reliability.”

Notably, a significant portion of these awards were received for digital excellence, underscoring the company’s continued progress in its digital transformation journey. Amana Takaful’s investments in technology-driven solutions, process automation, and enhanced digital customer experiences have played a key role in strengthening accessibility, efficiency, and service delivery across both Life and General businesses.

The recognition further reinforces Amana Takaful’s standing within the industry, highlighting its ability to sustain performance and adapt in a dynamic environment. For Every Sri Lankan, as one.