Business
Real question is not whether SL should go to IMF or not: Verité Research
‘ Sri Lanka makes the mistake of letting IMF write a plan for the country’
by Sanath Nanayakkare
The real question is not whether Sri Lanka should go to the IMF or not. What is important is going to the IMF with confidence after having analysed the fiscal situation, with a convincing plan, Executive Director of Verité Research Dr. Nishan de Mel said in Colombo recently.
He made this remark at a CEOs Forum hosted by CA Sri Lanka to provide clarity on the current debt situation, whilst also helping the business community gain a better understanding on the government’s strategy and way forward to navigate through the ongoing situation.
State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal, was the guest speaker and the panel session brought together eminent speakers comprising of Governor of the Central Bank of Sri Lanka Professor W. D. Lakshman, Chairman of the Ceylon Chamber of Commerce Vish Govindasamy, [Executive Director of Verité Research (Pvt) Ltd Dr. Nishan de Mel], and Managing Director of Fitch Rating Agency Maninda Wickramasinghe.
Dr. Nishan de Mel further said: “For instance, when you go to a bank with a business idea to take out a loan, the bank says, ‘give me your plan’. But if you get the credit officer to write the plan for you it won’t be appropriate. The mistake Sri Lanka makes is letting the IMF write that plan for the country because the country doesn’t have one. The crux of the matter is; the credit officer shouldn’t write the plan. The country should present the plan and convince the credit officer that the plan has the potential to work out – a plan backed by an analysis that can win the confidence of the lender. That’s the structured way to obtain an IMF facility for Sri Lanka. I do hope that we can take that path.”
“The Central Bank may have a different approach to analyzsng the situation – I think publishing that analysis would be very valid because that is a test of some scrutiny and others would be able to look at it – that is a way to give confidence. I completely accept that there is no one way to analyse the situation and determine the approaches we can take, but it is important to make the chosen approach public.”
“The government and the Central Bank of Sri Lanka (CBSL) are on the right path with regard to reducing the ratio of foreign debt to domestic debt, but the greater reliance placed on domestic financing too quickly would be like running a marathon too fast as it could burn out the accelerated shift.”
“On the other hand, we might not have the option of being too slow on this aspect as rating agencies are downgrading and the markets are observing. Amid this we have to build confidence. These are very concerning which is why I say it is not too late for Sri Lanka to realign its strategy to get out of the problem and to keep its debt sustainable while making sure we won’t run into a liquidity crisis.”
“Verité’s own analysis shows that there are four steps that can make debt repayment more sustainable and a fifth step to avoid a reserve crisis which people are worried about.”
“Number 1; the interest rates on local debt can be no higher than inflation which I think we have probably achieved. The Central Bank has had a larger tolerance for inflation and it will end up in 6.5% range, and interest rates on local debt have been brought down which is an important part of the function. I t will take some time for all the government debt to reflect that lower rate, but that in reality is the right path. However, it’s a cost to society because inflation is costly in terms of real returns from your bank balances or investments.”
“Secondly, interest rates on foreign denominated loans can’t be higher than GDP growth There also Sri Lanka is well placed because even though we talk about having a large amount of commercial debt, the history of concessional debt is so high that our weighted average interest rate on foreign denominated debt is still only 3.9%, and going forward with a growth of about 4%, we can maintain that. Being able to maintain the interest on that percentage rate for foreign denominated loans is favourable for Sri Lanka.”
“Then there are two other conditions that Sri Lanka needs to do more about. One is the primary deficit- that is the deficit after paying interest- which should be less than 60% of GDP growth – that means if the GDP growth is 5%, primary deficit can’t be more than 3%. If we are expecting a lower GDP growth this time; say a growth of 3.3%, then the primary deficit can’t be more than 3%. So we really have to control that and bring it down. And it is very important to report those numbers correctly to give the markets that confidence. This still allows for a budget deficit in the high single digits because our total interest on debt is over 6% of GDP. This is not drastic, but it says that deficit has to be in the mid single digits. If we want to maintain the deficit, we need to be able to manage the upper single digits with a doable plan.”
The fourth is that depreciation of the currency can be no higher than inflation, and that brings us to the fifth step because currency depreciation today is not based on the fundamental mismatch in global crisis vs Sri Lankan crisis. From 2015 to 2019, one of the major important adjustments made was, to bring it to what you call the real exchange rate. Sri Lanka’s exchange rate until 2015 was significantly over valued. Even though depreciation hurt, the adjustment brought stability. That was an important alignment. That alignment is still sort of in place but today because of the uncertainty about the reserves, you see a speculative exchange rate- and that simply puts pressure on depreciation.”, he said.
Analysts see budget-conscious international buying amid global economic pressures
This week’s Sri Lanka tea auction recorded the highest volume since February, with total offerings reaching 6.45 million kilograms (M/Kgs). However, the market displayed a mixed performance, with high-quality Broken Orange Pekoe (BOP) varieties facing price declines while lower-end teas saw appreciation.
Select Western BOP/BOPF teas, typically among the most sought-after, dropped by over Rs. 100 per kg, while others in the category saw smaller declines. Nuwara Eliya BOPs, known for their delicate flavor were mostly unsold, and when sold, fetched up to Rs. 200 per kg less than previous levels. Uva BOPs also declined by up to Rs. 50 per kg, reflecting weaker demand for premium liquoring teas.
In contrast, teas at the lower end of the market fared better. Below Best BOPs remained steady, while BOPFs in the same category fell by Rs. 50 per kg or more, influenced by inconsistent quality. Meanwhile, Low Grown PF1s (CTC grade) saw a firmer trend, with some appreciation in value.
The Leafy and Semi-Leafy sector saw Select Best BOP1s maintain stable prices, while OP1s (Orange Pekoe) were irregular—well-made varieties eased, but others appreciated. In the Tippy segment, high-priced FBOPs dipped, but Best and Below Best grades held firm, with the lowest-end teas gaining value.
Despite price corrections, all categories met fair demand, with Low Growns dominating at 2.6 M/Kgs. The Premium catalogue showed selective firmness for very tippy teas, while others eased or declined.
Analysts suggest that the dip in high-quality teas may reflect subdued demand from key export markets, while the resilience of lower-grade teas indicates steady domestic and budget-conscious international buying.
“With global economic pressures persisting, auction trends may continue fluctuating in the coming weeks,” they said.
– Reported using data from Forbes & Walker Tea Brokers
By Sanath Nanayakkare
The publication on the Financial Statements and Operations of the Central Bank of Sri Lanka 2024, a requirement under Section 99(2) of the Central Bank of Sri Lanka Act, No 16 of 2023, was presented to the President and the Minister of Finance, Planning and Economic Development, Anura Kumara Dissanayake, by Dr. Nandalal Weerasinghe, the Governor of the Central Bank of Sri Lanka, 29 April.
Dr. N S Kumanayake, Secretary to the President, Ms. Lasanthi Sirimanne, Chief Accountant and Ms. Samudra Jayasundera, Director Policy Review and Monitoring Department of the Central Bank were also present at this occasion.
The Financial Statements and Operations of the Central Bank of Sri Lanka 2024 present an overview of the Central Bank’s institutional performance during the year 2024. The publication is structured into three main components: Operational Insights, Financial Statements, and Supplementary Information.
The Operational Insights section outlines the Central Bank’s strategy and its core responsibilities, including maintaining domestic price stability, ensuring financial system stability, overseeing payment and settlement systems, managing currency issuance, and strategic communication. This section also covers the Bank’s international engagements, the execution of other entrusted responsibilities including agency functions, and internal management arrangements.
The Financial Statements section presents the IFRS-compliant financial statements of the Central Bank of Sri Lanka for the year ended 31 December 2024, along with the independent report of the Auditor General. This segment also includes a financial review, providing an analysis of the Bank’s financial performance during the year.
The Supplementary Information section provides details on the Bank’s regional presence, the list of institutions regulated and supervised by the Central Bank, and a summary of corporate information.
The interactive PDF of this publication can be accessed through; https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/financial-statements-operations
Business
Emirates deepens strategic partnership with Sri Lanka Tourism Promotion Bureau to support local travel industry
At the Arabian Travel Market 2025, Emirates and the Sri Lanka Tourism Promotion Bureau (SLTPB) have renewed their partnership aimed at further developing the country’s tourism and trade industries. The partnership was sealed through a Memorandum of Understanding (MoU) between the two parties.
The MoU was signed by Essa Sulaiman Ahmad, Emirates’ Senior Vice President of Commercial West Asia & Indian Ocean and Sampath Nissanka, Managing Director – Sri Lanka Tourism Promotion Bureau. The signing ceremony was also attended by Adnan Kazim, Emirates’ Deputy President and Chief Commercial Officer; Alexi Gunasekera, Consul General-designate of Sri Lanka to Dubai and the Northern Emirates in addition to other representatives of the airline and tourism board.
First inked in 2022, the renewed MoU will strengthen the collaboration between Emirates and SLTPB, with both the airline and tourism body reiterating their commitment to actively promote Sri Lanka as a destination to key markets within Emirates’ network.
Through joint initiatives, such as developing excursions and familiarization trips to promote the island nation to key feeder markets, Emirates and SLTPB aim to grow the tourism industry of the popular Indian Ocean destination by showcasing the destination to customers across the airline’s global network.
The joint efforts to boost the nation’s tourist industry have supported a steady increase in inbound traffic into the island, which recorded just over 2 million visitors in 2024. Between April 2024 and March 2025, Emirates carried over 240,000 passengers into Sri Lanka from key markets around its network including Russia, the UK, Germany, Australia, China, and the US, among others.
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