Business

Central Bank sets its macroeconomic projections in a firm direction

Published

3 years ago

2023/08/9

Sahan Weerasooriya

But warns of uncertainty surrounding forecasts of given variables

by Sanath Nanayakkare

After the Central Bank of Sri Lanka (CBSL) recently set a more inclusive and predictable Monetary Policy under the new CBSL Act, the business community appears to be taking their cue from the Bank’s medium term economic projections as was evident by the increased buying interest at the Colombo Stock Exchange when the market opened trading for the week on August 7.

On August 3, Dr. P. K. G. Harischandra, Director of Economic Research at the Central Bank of Sri Lanka said that CBSL’s latest Monetary Policy Report would give guidance to financial markets and other stakeholders as to how inflation and price stability would behave in the medium term (next 2-3 years), and therefore, they could assess future trends in the economy while evaluating the matrix of downside risks and upside risks in their investment and business decisions.

“Anchoring inflation expectations is a key element in the Monetary Policy framework. We will be focusing on the need to stabilize inflation expectations in businesses and households alike,” he said on 3rd August addressing journalists at a technical discussion on the Monetary Policy Report.

Illustrating Inflation fan charts for the medium term, Dr. Harischandra said,”CBSL arrives at macroeconomic projections including that of inflation, using a semi-structural macroeconomic model. These projections are usually updated on a quarterly frequency along with the release of GDP data. Projections are arrived at using released data, projections of major global indicators, near-term forecasts of selected variables and judgments,” he said.

However, he pointed out that forecasts are uncertain by nature, which is represented by the confidence intervals, and this uncertainty needs to be taken into consideration when such forecasts are used for various purposes.

“As per latest projections, inflation is expected to reach single digit levels in Q3 2023, and will stabilize at the desired levels over the medium term. So, when inflation stabilizes over the medium term, interest rates also will move in line with it. A major element here is the risk factors on the forecasts. Sometimes the actual figures could differ from the baseline forecasts. We explain such risks in the Monetary Policy report, he said.

Dr. Harischandra noted that CBSL would build up credibility of the projections process through increased communication with the public ensuring a high level of transparency.

“Going forward, we will be publishing a forecast and when we receive actual data in the coming weeks and months, we will be able to see the difference between our forecasts and actual data. Yes, there may be some difference as our projections may not be 100% accurate. We will then explain why any such deviations from the forecasts have happened. And then we can refer to what adjustments are needed on the medium term forecasts for the benefit of the public and businesses. Through this process, we are committed to increasing the transparency and credibility of the Monetary Policy and our projections. Because when we commit ourselves to a medium term target, we have an accountability to achieve it. That is a requirement of the Monetary Policy.”

Speaking further Dr. Harischandra said, “In addition to maintaining price stability, there will be other policy coordination, and we will be creating a platform for discussions in order to support decision making in broader terms”

“In June 2023, Colombo Consumer Price Index (CCPI) was 12%. In July it came down to 6.3%. The core inflation declined to 6.1%. Within this month, we expect that it will come into the targeted range. When headline inflation came down to 6.3%, food inflation became a negative 1.4%. Non-food has gone up by 19.5%, but transportation is a negative 9.3%. These reasons, prudent policies on the fiscal front and the inflation base effect in 2022 mainly brought inflation down. People ask if inflation has decelerated why prices aren’t coming down. We say at every forum that a fall in inflation is not necessarily about a fall in prices of all commodities across the board. Prices of some consumer items have declined notably giving relief to the consumers and prices of some other items have slowed the rate of increase in prices. Overall, there are no price shocks now. Journalists also have a task in communicating this properly to the public because it is a huge incomprehension that a fall in inflation is a fall in prices of everything.”

“Each economy needs some inflation. If there is negative inflation nobody will invest and produce because if prices keep coming down there will be losses. So, no country targets negative inflation. But as we came from a very high inflation to lower inflation, there was some negative inflation. A good rule of thumb for any country is not to let the price of the overall basket to get negative inflation because the consequences of that could ripple through the economy.”

Dr. Harishchandra told The Island Financial Review that the exchange rate of the US dollar to LKR won’t see much of an adverse effect when the government begins to make foreign debt repayments because the Domestic Debt Optimization programme is designed to withstand such risk.

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Business

EU’s new anti-greenwashing rules pose major challenge for Sri Lankan exporters

Published

23 mins ago

2026/06/22

Thilina Walpola

This new directive applies to businesses across multiple sectors, of any size, that export products or services to the EU market.

Countdown to September 2026 begins

Sri Lankan exporters selling into Europe may soon face one of the most significant regulatory shifts in recent years as the European Union prepares to enforce sweeping new rules aimed at eliminating ‘misleading’ environmental and sustainability claims.

The regulation, known as the Empowering Consumers for the Green Transition Directive (EmpCo) – Directive (EU) 2024/825, will become fully enforceable across all EU member states from September 27, 2026. While the directive is primarily designed to protect European consumers from so-called ‘greenwashing,’ and it carries important implications for exporters worldwide, including those in Sri Lanka.

Compliance experts warn that many local businesses remain largely unaware of the new requirements despite their potential impact on market access, brand reputation, and regulatory compliance.

The directive introduces a simple but demanding principle: companies must be able to substantiate environmental and sustainability claims with credible evidence. Generic descriptions such as ‘eco-friendly,’ ‘green,’ ‘sustainable,’ ‘responsible,’ ‘carbon neutral,’ or ‘climate friendly’ may no longer be used freely unless they can be verified through reliable data and supporting documentation.

For Sri Lankan exporters, this represents a significant shift. Sustainability claims increasingly appear on product packaging, websites, social media campaigns, annual reports, tourism marketing materials, and corporate communications. Under the new framework, such claims could face scrutiny from regulators, consumers, retailers, and civil society groups.

The directive also places particular emphasis on future environmental commitments. Claims such as ‘Net Zero by 2040’ or ‘Carbon Neutral by 2030’ may require businesses to demonstrate clear implementation plans, measurable milestones, and systems for monitoring progress rather than relying on aspirational statements alone.

An environmental compliance expert told The Island Financial Review that this transforms sustainability from a communications exercise into a governance issue. “Responsibility will no longer rest solely with sustainability departments. Company directors, senior executives, marketing teams, procurement professionals, and compliance officers will all have roles to play in ensuring that public claims can withstand regulatory scrutiny. The potential costs of non-compliance are considerable. Under the directive, penalties may include fines of up to four percent of annual turnover generated within the relevant EU member state, restrictions on marketing activities, increased regulatory investigations, and challenges from consumer organisations and commercial partners.”

“The reputational consequences may prove even more damaging. In highly competitive export markets, trust has become a critical business asset. Companies found to be making unsubstantiated environmental claims could face long-term damage to relationships with buyers, retailers, and consumers.”

“The timing is particularly important for Sri Lankan businesses because compliance preparations, reporting frameworks and adjustments are needed before the enforcement date arrives.”

“Businesses supplying European markets are therefore being encouraged to begin assessing their exposure now rather than waiting until the last minute. Early preparation could help exporters safeguard market access, maintain buyer confidence, and strengthen their competitive position in an increasingly sustainability-conscious global economy.”

“For Sri Lanka’s export sector, the message from Europe is becoming increasingly clear: sustainability claims will no longer be judged by how compelling they sound, but by how convincingly they can be proven,” he said.

As the countdown to September 2026 begins, exporters may need to ask themselves a critical question: Are their sustainability claims ready for a new era of accountability?

By Sanath Nanayakkare

Business

University of West London opens Sri Lanka’s first full UK university branch campus

Published

29 mins ago

2026/06/22

Thilina Walpola

The official signing ceremony between the University of West London, UK and ANC Education.

The University of West London (UWL) has formally opened the University of West London Sri Lanka Branch Campus, the country’s first full UK university branch campus, marking a landmark development in Sri Lanka’s higher education sector.

The University of West London Sri Lanka Branch Campus is designed to bring a UK university learning experience closer to students in Sri Lanka. The campus is operated by ANC Campus, a pioneer in the higher education sector in Sri Lanka with over two decades of experience in delivering internationally recognised education.

The University of West London Sri Lanka Branch Campus gives students the opportunity to study towards world-class UK degrees while remaining close to home. Academic delivery, assessment and quality assurance will be aligned with University of West London standards, with the University maintaining academic oversight of its courses and awards. Students will have access to UWL-approved programmes, academic support, learning resources and a campus environment designed to promote academic success, confidence and employability.

Business

Xiaomi Store powered by Abans opens at One Galle Face Mall

Published

33 mins ago

2026/06/22

Thilina Walpola

Xiaomi Sri Lanka, marked a significant day in the brand’s local journey with the launch of the all-new Xiaomi 17T and the grand opening of the new Xiaomi Store powered by Abans at One Galle Face Mall, Lower Ground.

This occasion reflects the brand’s growing presence in the country and its commitment to bringing smarter technology, connected devices and immersive customer experiences closer to Sri Lankan consumers.

Held under the theme “Step into a smarter world with Xiaomi,” the launch event welcomed media, partners, technology enthusiasts and customers to experience Xiaomi’s latest innovation and wider smart ecosystem. The new store at One Galle Face Mall powered by Abans has been designed to give customers a hands-on experience across Xiaomi smartphones, smart home products, lifestyle technology and connected devices, supported by Abans’ strong retail presence and customer service network.

Commenting on the milestone, Kain Wang, Country Head, Xiaomi Sri Lanka, said, “17th June is a significant day for Xiaomi in Sri Lanka as we celebrate two important milestones together: the launch of the Xiaomi 17T and the opening of our new Xiaomi Store powered by Abans at One Galle Face Mall. This reflects the strength of Xiaomi’s journey in Sri Lanka and our continued commitment to offering innovation, performance and smarter lifestyle experiences to local consumers. With Xiaomi 17T, we are bringing advanced Leica imaging, powerful performance and long-lasting battery life to users who want to do more with their smartphones. At the same time, our new store creates a dedicated space for customers to experience the Xiaomi ecosystem in a more personal and engaging way.”