Business

Crunch time just about to descend upon Sri Lanka

Published

5 years ago

2022/01/10

Repaying foreign debt or financing essential imports?

The available foreign reserves of the country can be used to either repay foreign creditors or to finance imports of essential goods and services required by its citizens. This is the dilemma facing Sri Lanka today.

Repaying the full value of the bond using the limited foreign reserves available would provide a windfall gain to those currently holding these bonds.1 But it will be at great cost to the citizens of the country who will face shortages of essentials like food, medicine, and fuel.

In these circumstances, it is in the best interest of all its citizens, for the government to defer payment of the US dollar 500 million International Sovereign Bonds

(ISB) coming due on 18 January 2022, until the economy can fully recover and rebuild.

Just as an individual with co-morbidities is more vulnerable to develop severe illness if infected with COVID-19 and more to likely require hospitalisation and even treatment in an ICU, Sri Lanka was vulnerable to economic shocks long before COVID-19 struck. The country was already facing several macroeconomic challenges. Muted economic growth. An untenable fiscal position. Although a tough consolidation programme was put in place to bring government finances to a more sustainable path, sweeping tax changes implemented at the end of 2019 reversed this process, with adverse consequences to government revenue collection. Weak external sector due to high foreign debt repayments and inadequate foreign reserves to service these debts.

COVID-19 only exacerbated these macroeconomic challenges. And like a patient who gets over the worst of COVID-19 has a long road to recovery; the economy of Sri Lanka faces many challenges to get back on track.

The onset of COVID-19 in early 2020, only worsened an already grim macroeconomic situation. The country lost the confidence of international markets, and the ability of the sovereign to rollover its external debt became difficult if not impossible. In these circumstances, there was a solid argument for a sovereign debt restructuring. But the response from the government and the Central Bank of Sri Lanka (CBSL) was a firm “No”.

The argument was that Sri Lanka never defaulted on its debt and it was not going to do so now. The official position was also that the government had a ‘plan’ to repay its debt and hence there was no reason to engage in a debt restructuring exercise. However, Sri Lanka faced high debt sustainability risks: the debt to GDP ratio at 110% was one of the highest historically and interest payments to government revenue at over 70% was one of the highest in the world.

Fast forward to 2022. The country’s foreign reserves declined to US $ 3.1 billion.2 Useable reserves are much lower. CBSL has sold over US $ 200 million of the country’s gold reserves to meet its debt obligations. In the first week of 2022, CBSL announced further swap facilities and its commitment to repay the International Sovereign Bond (ISB) of US $ 500 million due in January.

According to statistics from the Central Bank, in addition to the ISB payment, there are pre-determined outflows from foreign reserves amounting to US $ 1.3 billion in the first two months of 2022. Further, based on trade data for the last 5 years, the country on average has a trade deficit of around US $ 2 billion to finance during the first quarter of the year (see Table 1). With expected inflows from tourism under threat with the onset of the Omicron variant and continuing decline in worker remittances, financing this external current account deficit will add further pressure on available foreign reserves. India which accounted for around 20% of recent tourist arrivals is now requiring returnees to the country to quarantine. This will likely further dampen tourist arrivals.

In this context, the country faces a trade-off between using its limited foreign reserves to repay its debt or utilising it to finance essential imports. US $ 500 million is sufficient to finance imports of fuel for five months; or pharmaceuticals for one year; or dairy products for one and a half years of; or fertilizer for two years.

See table 1: Summary of External Sector Performance Q1 – 2017 to 2021 (US $ mn)

Therefore, it is in the best interest of the country and its citizens for the government to defer payment on its debt and use its limited foreign reserves to ensure uninterrupted supply of essential imports. But this requires a plan. To minimise the cost to the economy, the government must immediately engage its creditors in a debt restructuring exercise. This will require a debt sustainability analysis (DSA) by a credible agency to identify the resources required for debt relief and the economic adjustment needed to put the country back on a sustainable path.3 This will be critical to bring creditors to the negotiating table and provide them comfort that the country is able and willing to repay its debt obligations in the future.

The cost of not restructuring is much higher. A non-negotiated default (if and when the country runs out of options to service its debt) would lead to a greater loss of output, loss of access to financing or high cost of future borrowing for the sovereign. It could even spill over to the domestic banking sector, triggering a banking or financial crisis.

The consequences are clear. What will we choose?

Dr. Roshan Perera is a Senior Research Fellow at the Advocata Institute and the former Director of the Central Bank of Sri Lanka

Dr. Sarath Rajapatirana is the Chair of the Academic Programme at Advocata Institute and the former Economic Adviser at the World Bank. He was the Director and the main author of the 1987 World Development Report on Trade and Industrialisation.

The Advocata Institute is an Independent Public Policy Think Tank. Learn more about Advocata’s work at www.advocata.org.

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Business

SLEIS 2026 to examine how Sri Lanka can strengthen its place in Asia’s growth networks

Published

1 hour ago

2026/09/16

Sahan Weerasooriya

Ambassador Akio ISOMATA / Chathuranga Abeysinghe / P.D. Singh

As Asia continues to account for a growing share of global economic activity, Sri Lanka faces an important opportunity to strengthen its links with regional trade networks, supply chains and economic corridors. How the country can make better use of these connections to attract investment, expand trade and strengthen its position in regional value chains will be among the key questions at the Sri Lanka Economic & Investment Summit 2026, organised by The Ceylon Chamber of Commerce on 12-13 October 2026.

Titled “Linking Sri Lanka to Asia’s Growth Networks: Trade, Corridors, and Value Chains,” the session will examine the opportunities for Sri Lanka to deepen its integration with the wider Asian economy and build stronger connections with regional and global markets.

The session keynote will be delivered by P.D Singh – Chief Executive Officer, India and South Asia, Standard Chartered Bank. He will be joined for a panel discussion by Chathuranga Abeysinghe – Deputy Minister of Industry and Entrepreneurship Development, Akio ISOMATA – Ambassador of Japan to Sri Lanka, MASAAKI Kawabata – Chairman – Toyota Lanka (Private) Limited, and Ravi Jayawardena – Group Chief Executive Officer-Maliban Biscuits (Private) Limited. The session will be moderated by Ms. Subhashini Abeysinghe – Research Director- Verité Research.

For Sri Lanka, stronger regional integration can open opportunities beyond traditional export markets. Greater participation in regional supply chains, improved trade connectivity and closer links to economic corridors can support investment in areas such as logistics, manufacturing, export services and other sectors connected to international production networks.

The discussion will consider what Sri Lanka needs to do to strengthen its position within these networks, including improving trade connectivity, attracting investment and creating a business environment that enables companies to participate more effectively in regional and global value chains.

It will also look at the experience of businesses and international institutions operating across the region, providing perspectives on how companies assess markets, build supply chains and identify locations for investment. With supply chains and investment flows increasingly shaped by regional connectivity, the session will also consider the partnerships and strategies needed to position Sri Lanka as a more competitive participant in Asia’s growth networks, while creating opportunities for trade, investment, innovation and economic growth.

The session will form part of the second day of SLEIS 2026, held under the theme “Positioning Sri Lanka in a Changing Global Economy: Resilience, Reform, and the Future of Economic Policy.”

The Sri Lanka Economic & Investment Summit 2026 is supported by its valued sponsors and partners. Platinum Sponsor – Standard Chartered Bank Sri Lanka, Gold Sponsor – VISA Worldwide (Pvt) Ltd., Bronze Sponsor – South Asia Gateway Terminals (Pvt) Ltd., Strategic Development Partner – Asian Development Bank, Telecommunication Partner – Dialog Telecommunication, Television Partner – Dialog Television, Session Sponsors – David Pieris Motor Company (Pvt) Ltd., Hemas Holdings PLC, Sunshine Holdings PLC, International Construction Consortium (Pvt) Ltd., Official Logistics Partner – Hayleys Advantis Limited, Official Airline – SriLankan Airlines Ltd., Official Hospitality Partner – Shangri-La Colombo, Airline Partner – China Eastern Air Holding Co. Ltd.

Registrations are now open at https://sleis.chamber.lk/. For more information, contact Alikie on 011 558 8805 (alikie@chamber.lk) or Shanuka on 0701082541 (events.division@chamber.lk).

Business

AAC launches seat belt safety awareness initiative with RDA Colombo

Published

1 hour ago

2026/09/16

Sahan Weerasooriya

The Automobile Association of Ceylon (AAC), in collaboration with the Road Development Authority (RDA) and Police – Traffic Division, will conduct a special Road Safety Awareness Programme to promote the importance of wearing seat belts in vehicles specially on the express highways in order to reduce road fatalities and serious injuries.

The official handing-over ceremony took place at the Chairman’s Office of the Road Development Authority on 14th September 2026, where specially designed Seat Belt Safety Hanging Tags & Stickers prepared by the Automobile Association of Ceylon were handed over to the RDA for distribution to motorists at entry points to the expressways.

The initiative is being conducted in connection with the seat belt law coming into effect on 19th September 2026 and is intended to create greater public awareness of the importance of wearing seat belts in both the front and rear seats of vehicles.

Representing the Automobile Association of Ceylon at the ceremony Dhammika Attygalle, President; Prasanna De Zoysa, Sectional Chairman – Road Safety; and Devapriya Hettiarachchi, Secretary, Senior Superintendent of Police -Traffic Sisira Peththrathanthri, participated in the programme.

The Automobile Association of Ceylon has consistently maintained that road safety is one of its foremost priorities. Through awareness campaigns, educational programmes and collaboration with government authorities and other stakeholders, the Association continues to encourage responsible driving and safer behaviour among all road users.

AAC believes that the proper use of seat belts, including by rear-seat passengers, is a simple but vital safety measure that can help reduce serious injuries and save lives in the event of a road crash.

The programme further strengthens the cooperation between the Automobile Association of Ceylon, the Road Development Authority and the Police in their shared commitment towards safer roads and saving lives in Sri Lanka.

Business

Sanath Jayasuriya as Brand Ambassador

Published

1 hour ago

2026/09/16

Sahan Weerasooriya

Mr. Dasun Wickramarathna, Chairman Global Housing & Real Estate (Pvt) Ltd with Sanath Jayasuriya, World Renown Personality & Brand Ambassador

Global Housing & Real Estate (Pvt) Ltd (GHR) has announced a landmark partnership with Sri Lankan cricket legend Sanath Jayasuriya, as its Brand Ambassador as GHR enters a new chapter in its journey within Sri Lanka’s luxury real estate sector.

The partnership was officially unveiled at a press conference held at Cinnamon Life, Colombo, on 14 September 2026, bringing together industry leaders, investors and members of the media under the theme “Two Gamechangers, A New Beginning.”

The collaboration brings together two names associated with challenging convention in their respective fields: Sanath Jayasuriya, whose fearless approach transformed the dynamics of international cricket, and GHR, which has sought to introduce new approaches to property investment and luxury living in Sri Lanka.

Over the past two decades, GHR has built its presence in Sri Lanka’s real estate sector with a focus on quality, structural integrity and long-term investment value.

A significant milestone in the company’s journey came in 2016, when GHR introduced the hotel residency concept to the Sri Lankan market. The model brought together luxury hospitality and real estate investment, creating opportunities for property ownership with the potential to generate investment returns while contributing to the growth of the country’s high-end tourism offering. GHR has since continued to expand its portfolio across key destinations in Sri Lanka.

Speaking at the announcement, Dasun Wickramarathna, Chairman of Global Housing & Real Estate (Pvt) Ltd, said, “For over twenty years, Global Housing & Real Estate has strived to push the boundaries of what property development can achieve in Sri Lanka. As pioneers who introduced the hotel residency concept back in 2016, our mission has always been clear: to provide high-yield investment opportunities for our clients while taking Sri Lanka’s condominium industry into a new frontier.”

Commenting on the decision to partner with Sanath Jayasuriya, he added, “When looking for a voice to represent GHR’s ethos, Sanath Jayasuriya was the natural choice. Just as Sanath disrupted traditional international cricket and redefined how the world viewed the opening overs, GHR challenged traditional approaches to real estate and established a new benchmark in luxury living. This partnership represents a true convergence; Two Gamechangers, A New Beginning.”