Business
Crunch time just about to descend upon Sri Lanka
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.
Business
Beyond arrivals: Can tourism and hospitality power Sri Lanka’s next growth phase?
The Australian High Commission in Sri Lanka recently hosted the latest edition of its ConnectED Thought Leadership Series at the Australian High Commissioner’s Residence in Colombo, bringing together senior leaders from Sri Lanka’s tourism, hospitality, travel, events, education and related sectors.
The discussion, themed “Beyond Arrivals: Can Tourism and Hospitality Power Sri Lanka’s Next Growth Phase?”, focused on the role of tourism and hospitality beyond visitor arrival numbers, examining how the sector could contribute to Sri Lanka’s broader economic development.
The distinguished panel comprised Shiromal Cooray, Chairman and Managing Director of Jetwing Travels; Angeline Ondaatje, Chairperson of Tangerine Beach Hotels PLC, Royal Palms Beach Hotels PLC and Tangerine Tours; and Grant Dreher, Chief Executive Officer of William Angliss Institute Australia.
The discussion was moderated by Wayne Crosbie, Director – International and Business Development, William Angliss Institute Australia, who facilitated the conversation around the evolving needs of the tourism and hospitality industry and the importance of connecting education, skills development and workforce readiness with industry demand.
Adding a practical and experiential dimension to the evening, students from the Colombo Academy of Hospitality Management (CAHM) played an active role in delivering the cocktail reception for the distinguished guests.
Business
SL’s ‘Global Destination Marketing and Communication Campaign’ gets into top gear
A high-level discussion on the implementation of Sri Lanka’s Global Destination Marketing and Communication Campaign, supported by the World Bank, was held at the Ministry of Foreign Affairs, Foreign Employment and Tourism. The initiative marks a significant step towards strengthening Sri Lanka’s position as a competitive and attractive destination in the global tourism marketplace.
The meeting focused on the importance of adopting a long-term, data-driven approach to destination marketing, underpinned by comprehensive analysis of tourism demand and supply trends, visitor behaviour, destination branding, and international marketing strategies. Discussions also highlighted the need for a transparent procurement process and institutional capacity-building to ensure the successful implementation and sustainability of the campaign.
Participants welcomed the technical expertise and strategic guidance to be provided by MTI Consulting and Skift Inc./JD, whose support will contribute to the development and execution of a globally competitive destination marketing programme. Through strong collaboration between public and private sector stakeholders, the initiative seeks to establish a sustainable roadmap to guide Sri Lanka’s tourism promotion efforts and enhance the industry’s competitiveness in key international markets.
The campaign is expected to play a vital role in strengthening Sri Lanka’s tourism sector, supporting increased visitor arrivals, generating economic opportunities, and contributing to broader national economic growth.
The discussion was attended by Aruni Ranaraja, Secretary to the Ministry of Foreign Affairs, Foreign Employment and Tourism; Chairpersons and Chairmen of tourism institutions under the Ministry; representatives of SLAITO, TAASL, the Tourism Advisory Committee, the World Bank, MTI Consulting, and Skift Inc./JD; as well as H.P. Somathilaka, Director General of National Planning.
Business
Labour shortages are pushing Plantation Companies towards machines, data and a different kind of worker
Sri Lanka’s plantation sector is entering a new phase of transformation, as technology and innovation reshape how estates operate, manage resources and sustain productivity. Across the country’s tea estates and other plantations, machines are increasingly complementing skilled workers in tasks once done almost entirely by hand, while software and data bring new precision to decisions traditionally guided by experience.
Automated harvesters, pruning machines and drones are being deployed alongside GIS mapping, digital weighing systems and enterprise software. Though the technologies vary, they point to a common shift: plantations are finding smarter ways to meet rising demands with a changing workforce.
Mechanisation, however, is not without challenges. Sloping terrain, fragmented fields and crop variability limit where machinery can be effectively deployed. Still, as operating costs rise and labour availability tightens, the ability to combine human expertise with technology is becoming essential to sustaining productivity, competitiveness and the long-term viability of the industry.
Addressing the labour shortage
Sri Lanka’s plantation companies face a labour market that has changed from the one on which the industry was built. Migration, demographic changes and attraction from other sectors have made it increasingly difficult to retain workers for plantation work.
That is why mechanization is spreading beyond the most obvious applications. At Bogawantalawa Tea Estates PLC, machinery is being used for land preparation, pruning, weeding, harvesting, and agrochemical application. Selective machine harvesting and mechanical pruning have been introduced in tea, while mechanized and semi-mechanized methods are being extended to other crops.
Agarapatana Plantations PLC has taken a similar approach. Fuel-powered and battery-operated harvesters are being used in the field, while backhoes assist with uprooting and levelling new clearings. Drones are being deployed for foliar spraying. In factories, automation and energy efficient machineries are being introduced where production volumes justify the investment.
The changing face of plantation technology
Beyond mechanisation, plantations are steadily evolving into data-driven businesses, with RPC’s increasingly adopting technologies that are reshaping day-to-day operations. Agarapatana Plantations is rolling out automated green-leaf weighing systems with facial recognition and planning fertigation-based irrigation. Ten factories already operate on solar power, with six of them being carbon neutral.
Likewise, Elpitiya Plantations PLC has introduced Ballotronix tea-leaf readers to assess leaf composition, supported by iHarvest and Microsoft Dynamics 365 Business Central, giving managers real-time visibility across thousands of hectares.
Talawakelle Tea Estates PLC has similarly pursued transformation since 1992, introducing hot-water boilers across all factories from 2008, electronic weighing with real time data collection since 2015, as well as tablets, computers and a new payroll system for employees. Rooftop solar along with three in-house hydro power plants located in Palmerston, Radella and Somerset estates provide renewable energy. State of the art, modern colour separators have been provided to its Low Grown factories. Since 2025, drones are been used for chemical/ foliar spraying. These developments highlight how the plantation sector has steadily embraced technology for greater efficiency and sustainability.
The technological shift does not stop at the edge of the field as factories are becoming increasingly automated, giving special emphasis to energy efficient equipment. At Elpitiya, more than 80% of their factories are mechanized with state of the art machineries, with the intention to raise both capacity and efficiency.
On the other hand, Malwatte Valley Plantations PLC illustrates another possibility. After expanding its cinnamon cultivation, the company encountered a shortage of skilled peelers. Its engineers responded by developing and patenting cinnamon-peeling machinery.
That is more than a labour-saving exercise. It shows how a constraint can encourage technological innovation- and potentially allow an industry to expand beyond the limits imposed by the supply of specialised labour.
The company is also investing in automated factory systems and machinery for “matcha” production. Technology, in this case, is being used not merely to reduce costs but to strengthen value addition to products.
Machines will not make workers obsolete
Workers are being trained to use harvesters, pruning equipment and spraying machinery, while new roles are emerging around upkeep, data collection and digital reporting.
Horana Plantations PLC, for instance, has introduced machine plucking to address labour shortages. The company reports improvement in yields, consistency and labour productivity, while technology-driven harvesting has also been used to make plantation work more attractive to younger workers.
“Technology has become a prerequisite requirement for the plantation sector as we deal with labour shortages and the need to improve productivity,” Secretary General of the Planters’ Association of Ceylon, Lalith Obeyesekere stated. He noted that priority should be given to technologies suited to Sri Lankan conditions, supported by training and enabling workers to use them effectively. “That is a more useful way of thinking about mechanisation than simply counting the jobs a machine might replace”, Obeyesekere went on to note. He is confident that these changes will raise the productivity and profitability in the sector.
The next harvest
The direction of travel is becoming clearer. Precision agriculture, digital crop forecasting, automated weather monitoring, smart irrigation, digital traceability and further mechanisation are likely to become more common.
That does not mean the end of the plantation worker, nor the disappearance of generations of agricultural knowledge. It means that both will increasingly operate alongside technology.
For an industry whose competitiveness has long depended on its ability to extract value from land and labour, the new imperative is simpler: create more avenues, waste less and make each worker- and each hectare- more productive.
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