Features
Standoff between Church and State

The 1962 coup – Part II
A group of senior Police and Military officers attempted to overthrow the Sirimavo Bandaranaike Government. They were driven by three critical events in the years leading up to January 1962. The coup participants belonged to the Westernised urban middle class who were alarmed at the undermining of the secular plural state and government.
By Jayantha Somasundaram
(Part I of this article appeared yesterday)
The first trigger was the anti-Tamil violence of 1958. The second trigger was the growing confrontation between the regime and the Christian community, particularly the Roman Catholic Church.
As soon as he took office S. W. R. D Bandaranaike had 21 CID and Special Branch gazetted officers resign or retire. Half of them were non-Sinhalese and the majority were reported to be Christian. Despite that, in 1957, 29 percent of the gazetted police officers were Burghers and about 65 percent were Christian. The situation in the military was no different during British times while the officers in the Army were mainly British, Burghers accounted for half the troops.
This anomaly goes back to 1902, when a Cadet Battalion was set up as part of the Ceylon Light Infantry Volunteers with companies initially in Royal College and then in the Christian public schools S. Thomas’ and Wesley in Colombo, Trinity and Kingswood in Kandy and Richmond in Galle. Buddhist and Hindu schools were late in introducing cadetting because of their adherence to ahimsa. When the Ceylon Army was established in 1949 the initial Officer Cadets sent to the Royal Military Academy Sandhurst for training were also largely from the ethnic and religious minorities. “Buddhist parents did not like their sons in the army … Perhaps there is something of the Buddhist aversion to killing in this prejudice …. There is an ancient tradition among the Sinhalese of employing mercenaries: Malays, Moors, Malabars, Tamils,” speculates Horowitz.
Despite their huge influence, the Protestant Christians in Sri Lanka were numerically small, a metropolitan minority making up one percent of the national population. By contrast, the Portuguese religious impact had resulted in a Roman Catholic community in the country that comprised seven percent. And unlike the Protestants who were split among numerous denominations, the Roman Catholics were united in a single church and fiercely loyal to their faith.
Neil Quintus Dias
The majority community as well as the regime feared what was termed ‘Catholic Action’, the attempt by lay Catholics to spread Catholic influence in a host society. “‘Bauddha Balavegaya (Buddhist Force) formed by L. H. Mettananda former principal of Ananda College, Neil Quintus (NQ) Dias, PM Sirimavo’s Defence Secretary and several other prominent Sinhala Buddhist nationalist leaders’ stand against ‘Catholic Action’ was well known. However, the existence of such a secretive campaign remained a mystery,” writes K. K. S. Perera (The Nation 4/11/12)
“N.Q. Dias was well known for his strong stand against ‘Catholic Action’ as it was then called,” wrote Bradman Weerakoon in Rendering Unto Caesar. “His actions in regard to the defence establishment and police were also being watched by the upper echelons of the three forces which were then largely manned by non-Buddhist officers.”
First the Sirimavo Bandaranaike Regime removed both local and foreign Catholic nursing nuns from state hospitals. This was followed by a decision to nationalise the assisted schools.
The school system was three-tiered. First, a small number of fee-levying public schools run mainly by the Anglican Church; they received no state financial support. Second, fee-levying denominational schools, mainly Roman Catholic, called assisted schools; they received government funding. Third, state owned schools which levied no fees.
The Catholic population is concentrated along the coastal belt stretching from Chilaw to Kalutara. In November 1960, the Army was brought in for internal security duties relating to the schools takeover; the 1st Battalion the Ceylon Light Infantry (1 CLI) covered Aluthgama, Ja-ela, Katunayake, Panadura and Kalutara. “There were demands in the Cabinet to … move forcefully against Christians protesting the takeover of the denominational schools,” explains Horowitz.
On the motive for the Coup, Sidney de Zoysa former Deputy Inspector General of Police (DIG) said, “The great issue then was the schools take-over. N. Q. Dias was a Buddhist chauvinist, and determined to take everything over into a Buddhist state. And Felix Dias was talking about a dictatorship and arguing that it would be a good thing,” wrote K. M. de Silva and Howard Wriggins in J. R. Jayewardene of Sri Lanka Vol II.
A Christian education for their children is vital and critical to Roman Catholics and the takeover of denominational schools was bitterly opposed by the Church. Parents occupied the schools and a siege mentality developed. Finally, Indian Prime Minister Jawaharlal Nehru had to request Cardinal Garcia of Bombay to go to Sri Lanka and mediate between the Church and the government to defuse the standoff. The final outcome however was that many denominational schools were taken into the state system with a minority in the cities being allowed to remain the property of the churches, but the latter could neither levy fees nor receive government assistance.
Tamil Satyagraha
When she became Prime Minister, Sirimavo Bandaranaike proceeded to implement the Official Language Act. And in January 1961 Sinhala became the country’s operative official language. “Army officers who were Sinhala Christians retired under the language Act because they thought their careers had no future,” writes Patrick Peebles in The History of Sri Lanka. “The police had been about three-fourths Christian. In 1962 police and military officers staged a coup attempt led not by Tamils but by Sinhala Christians.”
K. M. de Silva and Howard Wriggins in J. R. Jayewardene of Sri Lanka Vol II conclude, “N. Q. Dias was suspect to them as the leader of a powerful religio-political force in the government – the Bauddha Jatika Balavegaya – intent on establishing control over the machinery of government for themselves by championing the cause of the Sinhala Buddhist majority. He was seen as the evil genius behind the government’s policies since Mrs. Bandaranaike came to power, directed against the minorities – Christians and Tamils.
“A former Cabinet Minister in Mrs. Bandaranaike’s Government reported tremendous pressure from Sinhalese Civil Servants to enforce strict language requirements on their Tamil colleagues in the hope of forcing them out,” says Horowitz, “N.Q. Dias is said to have made life difficult for Tamil Civil Servants, helping to push some out because of disqualification in Sinhalese.”
These events led to the Federal Party launching a Satyagraha, a civil disobedience campaign across the northern and eastern provinces, bringing government administration to a standstill. The third trigger for the coup participants was the use of the Army against the Tamil Satyagraha.
One of the coup participants who had been assigned to Jaffna found the
Satyagraha peaceful and advised against the use of force. But when he sat in on a Cabinet discussion he found that the Government wanted to use the Army in the North to “teach the Tamils a lesson.”
The government therefore ordered the 3rd Field Artillery Regiment to Jaffna.
But when it was time to entrain, the commanding officer Lieutenant Colonel Willie Abrahams MBE, and his second in command Major Ignatius Loyola, who were Tamil Catholics, were barred from accompanying the regiment. Instead, Lieutenant Colonel Richard Udugama MBE, an infantry officer who was a kinsman of Mrs. Bandaranaike was placed in command. The troops protested at the station, refusing to entrain without their commanders until Colonel Abrahams prevailed upon them to proceed without him.
Army occupation of
North and East
Leaders of the Federal Party were arrested and detained at the Army Cantonment, Panagoda. Lt Col Richard Udugama was appointed Coordinating Officer Jaffna District, with Lt Col Lyn Wickremasuriya (Trincomalee), Lt Col P. D. Ramanayake (Batticaloa), Major S.T.B. Sally (Mannar) and Major C.F. Fernando (Vavuniya). And a state of emergency was declared.
“The Army brutalized the peaceful protesters … (and) began a two year long occupation of the Northern and Eastern Provinces,” writes Brian Blodgett in Sri Lanka’s Military: The Search for a Mission 1949-2004. The government also began to establish “several permanent camps in the northern and eastern sectors of the country.” N. Q. Dias wanted to increase the armed forces deployed to the north and east and the creation of new military bases in Arippu, Maricchikatti, Pallai, Thalvapadu, Pooneryn, Karainagar, Palaly, Point Pedro, Elephant Pass, Mullaitivu and Trincomalee.
The deployment of the Army to deal with what was essentially a civil political issue was viewed by many Ceylonese with a liberal secular outlook, as deliberately provocative. And this sentiment, though more latent, was also shared by both the cosmopolitan Tamils living in Colombo who considered themselves essentially Ceylonese as well as the more conservative Tamil-speaking people of the North and East. In Sri Lanka: Political-Military Relations Prof K. M de Silva wrote, “The attitude of the Tamils to the police and the security forces stationed there began to change in the 1960s and with it their view of the role the forces played. In the Jaffna peninsula, the principal centre of Tamil residence in the island, the police began to be seen as part of the state security network devised to keep the Tamils down.”
These developments were compounded by what Blodgett believed was Mrs. Bandaranaike’s desire for more Sinhalese Buddhist officers in order to “give them greater influence in running of the armed services”, when Mrs. Bandaranaike took over as Prime Minister in July 1960. He quotes K.M. de Silva who says that with the new government there was a major shift in “the ethnic and religious composition of the officer corp.
“Interpreters frequently note that ‘all but a few of the accused were Christians, mostly Roman Catholics.’ And they generally view the coup as a Christian reaction to the Buddhist resurgence and ascendency of the several years preceding 1962,” writes Donald Horowitz. “The heavily Westernised English-speaking, urban elite felt itself under stress. So did the ethnic and religious minorities: Tamils, Burghers, and Sinhalese Christians. The urban elite and the minorities were well represented in the officer corps of all the armed services and among the conspirators as well.”
Horowitz goes on: “‘The politicians were treating the country as if it belonged only to the Sinhalese who were Buddhists and no one else,’ argued a Sinhalese Christian Police Officer. Other Sinhalese officers, Christian and Buddhist, agreed.”
Felix Dias
“Although dispirited, those adversely affected by the post-1956 changes had not given up. Among Tamils there was some tendency to espouse the federalist solution…excluded from all the opportunities Colombo afforded at least they could return to administer their own areas in Jaffna … For non-Tamils, this course was not open. They dreamed not of an Asian Switzerland, where ethnic groups might coexist in an amicable territorial separatism; their model was rather of a tolerant, cheek-by-jowl cosmopolitanism in which a person’s origins might affect what he ate or where he worshipped but would have no public importance. The potency of these ideals … were held … because it was known that they were the ideals of the wider world beyond Sri Lanka’s shores,” concludes Donald Horowitz.
The Coup participants realised that Udugama was being groomed to take over command of the Army by promoting him over his seniors. He had organised a Buddhist Association within the Army, and officers including Buddhists who refused to be drawn into his Association regarded him with disdain.
For those who launched the coup the personification of the growing authoritarian-theocratic trend was Felix Dias, Parliamentary Secretary to the Ministry of Defence and nephew of S. W. R. D. Bandaranaike. At their trial they asserted that the coup was a pre-emptive move to thwart a dictatorship by Felix Dias. According to one of the Coup participants “If Felix Dias had established himself in power … his regime would have rested on Sinhala Buddhist sentiment.”
By now military commanders were convinced that their authority was eroding and being replaced by an insidious dictatorship. “Felix Dias had at a meeting … in reference to conditions in Russia, stated that a little bit of totalitarianism might be of benefit to Ceylon.” (Trial-at-Bar)
“Felix Dias had antagonised many of the senior police and military officers by his interference in details of administration and by a hauteur which they found insufferable in one so young and inexperienced.” (K. M. de Silva and Howard Wriggins J. R. Jayewardene of Sri Lanka Vol II)
“The majority of the conspirators reserved their most extreme animosity for Felix Dias … Because of his political position and personal style, the conspirators distrusted and disliked him …” explains Donald Horowitz. “Their characterisations of him were unflattering in the extreme: ‘the most arrogant bastard you ever met … pompous … revengeful … untruthful … a bit mad.”
To be continued
Features
Banking Rules fail the elderly and informal sector

Yesterday, I received a phone call from a well-known private bank. A polite female voice on the line asked whether I was interested in obtaining a housing loan. Knowing how things typically work in the Sri Lankan banking system, I decided not to waste her time—or mine. So, I responded candidly: “I’m over 60. Are you still interested in offering your service to me?”
As expected, she politely replied, “No sir, we offer housing loans only to customers below the age of 60.”
Now, let’s think about this for a moment. If you’re 59 years old, does that mean the bank will give you a housing loan with just a one-year repayment period? Apparently, yes. What kind of absurd banking logic is this? Such rigid age cut-offs do not reflect risk management, but sheer bureaucratic laziness.
Banks and other financial institutions follow rules set by the Central Bank of Sri Lanka. One of the main reasons for these rules is to protect the money that people deposit. Figure 1 shows one of those orders to regulate home loans provided by banks.
Employees are to provide banks with confirmation from their respective employer regarding the retirement date/age, as applicable. This requirement introduces administrative friction for the borrower and places unnecessary dependence on employer documentation. Many private sector employers do not maintain strict retirement policies, and contract-based employment has become common. Mandating employer confirmation becomes especially problematic in such cases.
Eligibility Criteria for Housing Loans Under the Terms of This Order (Effective from 10 December 2020) specify the following individuals are eligible to obtain housing loans:
Salaried Employees
* Individuals must be employed in either the public sector (e.g., government departments, state-owned enterprises) or the private sector (e.g., registered companies, private institutions).
Confirmed in Service
* The employment must be confirmed, i.e., the borrower should have completed any probationary period and be in permanent or long-term service. Probationary employees or temporary/contract workers may not be eligible under this order.
This eligibility criterion is narrow and exclusionary, especially in an evolving labour market where:
* Many skilled workers are self-employed, on a contract basis or work in the gig economy would find hard to provide evidence to prove their repayment capacity.
* Job confirmation timelines are often extended due to changing employment practices.
* Real estate investment is increasingly seen as a retirement or family-planning strategy, including among older or self-funded individuals.
While the intent may be to minimise risk for banks by ensuring repayment capacity and employment stability, this overly conservative approach may discriminate against capable, creditworthy individuals, especially older citizens or those outside traditional salaried employment structures.
Tenure of a loan
Figure 2
is an excerpt from the directive issued by CBSL, highlighting the restrictions imposed on the tenure of home loans.
Interestingly, Deshamanya Lalith Kotelawela was one of the few who had the courage—and arguably the foresight—to challenge such irrational norms. While some of his business decisions were controversial, especially the appointment of non-professionals to key financial roles, his thinking on housing loans for older customers was progressive. He proposed that housing loans should be extended even to individuals aged between 60 and 70, with repayment periods of 20 to 30 years. However, he also recommended attaching insurance to these loans—an approach that could benefit his own insurance companies. Naturally, the premiums would be significantly higher for older or higher-risk borrowers.
His reasoning was rooted in both financial logic and social realism: in most Sri Lankan families, children would never allow their parents to lose the family home. In the worst-case scenario, the property—often the most secure asset one can offer—serves as reliable collateral. From a regulatory standpoint, too, this makes sense. According to the Basel framework for banking supervision, residential mortgage loans carry a risk weight of only 50% when calculating capital adequacy. That means such loans are already considered relatively low risk.
So, why are banks clinging to these outdated, “one-size-fits-all” rules that ignore real-world dynamics, demographic shifts, and even their own financial regulations?
These are not just outdated policies—they are stupid banking rules.
Age Discrimination and Financial Exclusion
This condition is fundamentally age-based and introduces structural discrimination against older borrowers. By linking repayment tenure strictly to the borrower’s retirement date, it disproportionately excludes capable individuals nearing retirement—even if they are financially stable, have substantial savings or collateral, or have alternative income sources such as pensions, business income, or rental properties. It presumes that retirement equals financial incapacity, which is not always true in the modern economy. Today, some retired government employees receive monthly pensions exceeding Rs. 100,000.
Ignores Multigenerational and Alternative Repayment Scenarios
This policy does not account for cases where a housing loan is taken for the benefit of the family, and repayment responsibility can logically transfer to a younger family member (such as an adult child or co-borrower). In South Asian cultures especially, joint-family structures and intergenerational financial support are common. Denying long-tenure loans, based on an individual’s remaining years of employment, ignores these sociocultural realities.
Penalises Those Who Start Later
Not everyone begins salaried employment early in life. Some people shift careers, pursue entrepreneurship, or even migrate and return to salaried employment later. Under this rule, a 45-year-old starting a government job would be eligible only for a 15-year loan, regardless of income or asset base. This rigid approach fails to reflect the dynamic nature of modern work and life paths.
Common sense
Banking is often celebrated as a sector driven by logic, data, and risk mitigation. Yet, it is riddled with regulations and practices that are outdated, unempathetic, and at times, downright illogical. A prime example of this is the age discrimination embedded in housing loan policies in many Sri Lankan banks—and indeed in banks across much of the world. The author’s anecdote of receiving a call from a reputed private bank offering a housing loan, only to be told that customers over 60 are ineligible, highlights a major flaw in modern banking systems.
At the heart of this issue lies a fundamental contradiction: while banks are supposed to be institutions that assess individual risk, they often make blanket decisions based on crude demographics such as age. If a person is 59 years old, they are technically eligible for a loan, but only for a tenure of one year, assuming the cut-off age is 60. That assumption, of course, is absurd. Imagine a healthy, wealthy 59-year-old customer being allowed to borrow only on terms designed for a dying man. This “stupid banking rule” lacks nuance and punishes individuals who might otherwise be low-risk borrowers with good collateral.
The Need for Reform
Age should not be the sole determinant of loan eligibility. In an era where people live longer, work well into their seventies, and often own significant assets, banking institutions must adopt more flexible, holistic credit assessment methods. Factors like health, income stability, family support, insurance coverage, and asset base must be considered alongside age.
Additionally, banks should be encouraged—or even regulated—to adopt inclusive lending practices. Policies that facilitate family-based guarantees, property-backed loans with transfer clauses, or reverse mortgage models can ensure that elderly individuals are not financially excluded.
(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe. He is also the author of the “Doing Social Research and Publishing Results”, a Springer publication (Singapore), and “Samaja Gaveshakaya (in Sinhala). The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of the institution he works for. He can be contacted at saliya.a@sliit.lk and www.researcher.com)
Features
Trump tariffs and their effect on world trade and economy with particular

reference to Sri Lanka – Part III
(Continued from yesterday)
Textile Industry Significance
The textile and apparel sector holds outsised importance in Sri Lanka’s economy. It accounts for approximately 40% of the country’s total exports and directly employs around 350,000 workers, predominantly women from rural areas, for whom these jobs represent a crucial pathway out of poverty. When indirect employment in supporting industries is included, the sector supports the livelihoods of over one million Sri Lankans.
The industry’s development was initially facilitated through quotas assigned by the Multi-Fiber Agreement (1974-1994), which allocated specific export volumes to developing countries. When this agreement expired, Sri Lanka managed to maintain its position in global apparel supply chains by focusing on higher-value products, ethical manufacturing practices, and reliability. The country has positioned itself as a producer of quality garments, particularly lingerie, activewear, and swimwear for major global brands.
However, this success has created a structural dependency on continued access to markets in wealthy countries, particularly the United States. As the Secretary General of the Joint Apparel Association Forum, the main representative body for Sri Lanka’s
apparel and textile exporters, bluntly stated following the tariff announcement, “We have no alternate market that we can possibly target instead of the US.”
This dependency is reinforced by the industry’s integration into global supply chains dominated by U.S. brands and retailers. Many Sri Lankan factories operate on thin margins as contract manufacturers for these international companies, with limited ability to quickly pivot to new markets or product categories. The industry has also made significant investments in compliance with U.S. buyer requirements and sustainability certifications, creating path dependencies that make rapid adaptation to new market conditions extremely challenging.
The textile and apparel sector’s significance extends beyond its direct economic contributions. It has been a crucial source of foreign exchange earnings for a country that has consistently run trade deficits and struggled with external debt sustainability. In the ten years leading up to Sri Lanka’s default on external debt (2012-2021), debt repayments amounted to an average of 41% of export earnings, highlighting how vital steady export revenues are to the country’s ability to service its international obligations.
The sector has also played an important role in Sri Lanka’s social development, providing formal employment opportunities for women and contributing to poverty reduction in rural areas. Many of the industry’s workers are the primary breadwinners for their families, and their wages support extended family networks in economically disadvantaged regions of the country.
Given this context, the imposition of a 44% tariff on Sri Lankan goods, with the textile and apparel sector likely to bear the brunt of the impact, represents not merely an economic challenge but a potential social crisis for hundreds of thousands of vulnerable workers and their dependents.
SPECIFIC IMPACT OF TRUMP TARIFFS ON SRI LANKA
The imposition of a 44% tariff on Sri Lankan exports to the United States represents a seismic shock to an economy still recovering from its worst crisis in decades. This section examines the immediate economic consequences, the implications for Sri Lanka’s debt sustainability, and the broader social and political ramifications of this dramatic policy shift.
Immediate Economic Consequences
The most immediate impact of President Trump’s tariffs will be a severe erosion of Sri Lankan goods’ competitiveness in the U.S. market. A 44% price increase effectively prices many Sri Lankan products out of reach for American consumers and businesses, particularly in price-sensitive categories like apparel, where margins are already thin and competition from other producing countries is intense.
Economic analysts project significant declines in export volumes as a result. The PublicFinance.lk think tank estimates that the new tariff rates will lead to a 20% fall in exports to America and an annual loss of approximately $300 million in foreign exchange earnings. Given that Sri Lanka’s total merchandise exports in 2024 were around $13 billion, this represents a substantial blow to the country’s trade balance and economic growth prospects.
The textile and apparel sector will bear the brunt of this impact. Industry representatives have warned that numerous factories may be forced to reduce production or close entirely if they cannot quickly find alternative markets for their products. The Joint Apparel Association Forum has indicated that smaller manufacturers with less diversified customer bases and limited financial reserves will be particularly vulnerable to closure.
These production cutbacks and potential closures would translate directly into job losses. Conservative estimates suggest that tens of thousands of workers in the textile sector could lose their livelihoods if the tariffs remain in place for an extended period. Given that many of these workers are women from rural areas with limited alternative employment opportunities, the social impact of these job losses would be particularly severe.
Beyond the direct effects on textile exports, the tariffs will have ripple effects throughout Sri Lanka’s economy. Supporting industries such as packaging, logistics, and input suppliers will face reduced demand. The loss of foreign exchange earnings will put pressure on the Sri Lankan rupee, potentially leading to currency depreciation that would increase the cost of essential imports including fuel, food, and medicine.
The timing of these tariffs is especially problematic given Sri Lanka’s fragile economic recovery. After experiencing a GDP contraction of 7.8% in 2022 during the height of the economic crisis, the country had only recently returned to modest growth. The IMF had projected GDP growth of 3.1% for 2025, but this forecast now appears overly optimistic in light of the tariff shock. Some economists are already revising their growth projections downward, with some suggesting growth could fall below 2% if the full impact of the tariffs materializes. We must hope they will be proven wrong.
Impact on Sri Lanka’s Debt Sustainability
Perhaps the most concerning aspect of Trump’s tariffs is their potential to undermine Sri Lanka’s hard-won progress on debt sustainability. After defaulting on its external debt in April 2022, the country has undergone a painful restructuring process that concluded only in December 2024. This restructuring was predicated on assumptions about Sri Lanka’s future ability to generate foreign exchange to service its remaining debt obligations.
The IMF’s debt sustainability analysis, which formed the basis for the restructuring agreement, focused almost exclusively on debt as a share of GDP while making insufficient distinction between domestic and foreign debt. This approach has been criticized for ignoring the structural trade deficit and the critical importance of foreign currency earnings to Sri Lanka’s ability to meet its external obligations.
The $300 million annual reduction in export earnings projected as a result of the tariffs directly threatens these calculations. Sri Lanka’s external debt stood at approximately $55 billion in 2023 (about 65% of its GDP), and even after restructuring, debt service payments will consume a significant portion of the country’s foreign exchange earnings in coming years.
In the decade preceding Sri Lanka’s default (2012-2021), debt repayments consumed an average of 41% of export earnings, an unsustainably high ratio that contributed directly to the eventual crisis. The loss of export revenues due to President Trump’s tariffs risks pushing this ratio back toward dangerous levels, potentially setting the stage for renewed debt distress despite the recent restructuring.
This situation highlights a fundamental flaw in the approach taken by international financial institutions to debt sustainability in developing countries. Unlike the treatment afforded to West Germany through the London Debt Agreement of 1953, where future debt repayments were explicitly linked to the country’s trade surplus and capped at 3% of export earnings—Sri Lanka and similar countries are expected to meet rigid repayment schedules regardless of their trade performance or external shocks beyond their control.
The tariffs thus expose the precariousness of Sri Lanka’s economic recovery and the fragility of the international debt architecture that underpins it. Without significant adjustments to account for this external shock, the country could find itself sliding back toward debt distress despite all the sacrifices made by its people during the recent adjustment period.
Social and Political Implications
The economic consequences of Trump’s tariffs will inevitably translate into social and political challenges for Sri Lanka. The country has already experienced significant social strain due to the austerity measures implemented under the IMF program, including tax increases, subsidy reductions, and public sector wage restraint. The additional economic pain caused by export losses and job cuts risks exacerbating social tensions and potentially triggering renewed protests.
The textile industry’s workforce is predominantly female, with many workers supporting extended family networks. Job losses in this sector would therefore have disproportionate impacts on women’s economic empowerment and household welfare, potentially reversing progress on gender equality and poverty reduction. Many of these workers come from rural areas where alternative formal employment opportunities are scarce, raising the spectre of increased rural poverty and potential migration pressures.
Politically, the tariff shock presents a significant challenge for President Anura Kumara Dissanayake’s government, which came to power promising economic revival and relief from the hardships of the crisis period. The administration has appointed an advisory committee consisting of government officials and private sector representatives to study the impact of the tariffs and develop response strategies, but its options are constrained by limited fiscal space and the conditions of the IMF programme.
The situation also raises questions about Sri Lanka’s foreign policy orientation. The country has traditionally maintained balanced relationships with major powers, including the United States, China, and India. However, the unilateral imposition of punitive tariffs by the United States may prompt some policymakers to reconsider this balance and potentially look more favourably on economic engagement with China, which has been a major infrastructure investor in Sri Lanka through its Belt and Road Initiative.
Such a reorientation would have significant geopolitical implications in the Indian Ocean region, where great power competition has intensified in recent years. It could potentially accelerate the fragmentation of the global economy into competing blocs, a trend that President Trump’s broader tariff policy seems designed to encourage despite its economic costs.
The social and political fallout from the tariffs thus extends far beyond immediate economic indicators, potentially reshaping Sri Lanka’s development trajectory and its place in the regional and global order. For a country still recovering from political instability triggered by economic crisis, these additional pressures come at a particularly vulnerable moment.
BROADER IMPLICATIONS FOR DEVELOPING ECONOMIES
Sri Lanka’s experience with Trump’s tariffs is not unique. The sweeping nature of these trade measures has created similar challenges for developing economies across the Global South, revealing structural vulnerabilities in the international economic system and raising fundamental questions about the sustainability of export-led development models in an era of rising protectionism.
Comparative Analysis with Other Affected Developing Countries
While Sri Lanka faces a punishing 44% tariff rate, it is not alone in confronting severe trade barriers. Bangladesh, another South Asian country heavily dependent on textile exports, has been hit with a 37% tariff. Like Sri Lanka, Bangladesh has built its development strategy around its garment industry, which accounts for more than 80% of its export earnings and employs approximately 4 million workers, mostly women.
Other significantly affected developing economies include Vietnam (46% tariff), Cambodia (49%), Pakistan (29%), and several African nations that had previously benefited from preferential access to the U.S. market through programs like the African Growth and Opportunity Act (AGOA). Many of these countries share common characteristics, relatively low per capita incomes, heavy reliance on a narrow range of export products, and limited domestic markets that make export-oriented growth their primary development pathway.
The pattern of tariff rates reveals a troubling dynamic, some of the highest tariffs have been imposed on countries that can least afford the economic shock. While wealthy nations like Japan or Germany certainly face challenges from these trade
barriers, they possess diversified economies, substantial domestic markets, and financial resources to cushion the impact. By contrast, countries like Sri Lanka or Bangladesh have far fewer economic buffers and face potentially devastating consequences from similar or higher tariff rates.
This disparity highlights how President Trump’s “reciprocal tariff” formula, ostensibly designed to create a level playing field, actually reinforces existing power imbalances in the global economy. By treating trade deficits as the primary metric for determining tariff rates, the policy ignores the vast differences in economic development, productive capacity, and financial resilience between countries at different stages of development.
Structural Vulnerabilities of Export-Dependent Economies
The tariff shock has exposed fundamental vulnerabilities in the export-led development model that has dominated economic thinking about the Global South for decades. Since the 1980s, international financial institutions have consistently advised developing countries to orient their economies toward export markets, specialize according to comparative advantage, and integrate into global value chains as a path to economic growth and poverty reduction.
This model has delivered significant benefits in many cases. Countries like Vietnam, Bangladesh, and, to some extent, Sri Lanka have achieved impressive poverty reduction and economic growth by expanding their manufacturing exports. However, President Trump’s tariffs reveal the precariousness of development strategies built on continued access to wealthy consumer markets, particularly the United States.
Several structural vulnerabilities have become apparent,
1. First, export concentration creates acute dependency on a small number of markets and products. When Sri Lanka sends 23% of its exports to the United States and concentrates 40% of its total exports in textiles and apparel, it becomes extraordinarily vulnerable to policy changes affecting that specific market-product combination.
Diversification, both of export markets and products, has often been acknowledged as desirable in theory but has proven difficult to implement in practice due to established trade patterns, buyer relationships, and specialized production capabilities.
2. Second, participation in global value chains often traps developing countries in lower-value segments of production with limited opportunities for upgrading. Sri Lanka’s textile industry, while more advanced than some of its regional competitors, still primarily engages in contract manufacturing rather than controlling higher-value activities like design, branding, or retail. This position in the value chain yields lower returns and creates dependency on decisions made by lead firms in wealthy countries.
3. Third, the mobility of capital relative to labour creates a fundamental power imbalance. If tariffs make production in Sri Lanka uneconomical, global brands can relatively quickly shift their sourcing to other countries with lower tariffs or costs. However, Sri Lankan workers cannot similarly relocate, leaving them bearing the brunt of adjustment costs through unemployment and wage depression.
4. Fourth, developing countries typically lack the fiscal space to provide adequate social protection during economic shocks. Unlike wealthy nations that can deploy extensive safety nets during trade disruptions, countries like Sri Lanka, already implementing austerity measures under IMF programmes, have limited capacity to support displaced workers or affected industries. This exacerbates the social costs of trade shocks and can trigger political instability. (To be continued)
(The writer served as the Minister of Justice, Finance and Foreign Affairs of Sri Lanka)
Disclaimer:
This article contains projections and scenario-based analysis based on current economic trends, policy statements, and historical behaviour patterns. While every effort has been made to ensure factual accuracy, using publicly available data and established economic models, certain details, particularly regarding future policy decisions and their impacts, remain hypothetical. These projections are intended to inform discussion and analysis, not to predict outcomes with certainty.
Features
Opportunity for govt. to confirm its commitment to reconciliation

by Jehan Perera
The international system, built at the end of two world wars, was designed with the aspiration of preserving global peace, promoting justice, and ensuring stability through a Rules-Based International Order. Institutions such as the United Nations, the UN Covenants on Human Rights and the United Nations Human Rights Council formed the backbone of this system. They served as crucial platforms for upholding human rights norms and international law. Despite its many imperfections, this system remains important for small countries like Sri Lanka, offering some measure of protection against the pressures of great power politics. However, this international order has not been free from criticism. The selective application of international norms, particularly by powerful Western states, has weakened its legitimacy over time.
The practice of double standards, with swift action in some conflicts like Ukraine but inaction in others like Palestine has created a credibility gap, particularly among non-Western countries. Nevertheless, the core ideals underpinning the UN system such as justice, equality, and peace remain worthy of striving towards, especially for countries like Sri Lanka seeking to consolidate national reconciliation and sustainable development. Sri Lanka’s post-war engagement with the UNHRC highlights the tensions between sovereignty and accountability. Following the end of its three-decade civil war in 2009, Sri Lanka faced multiple UNHRC resolutions calling for transitional justice, accountability for human rights abuses, and political reforms. In 2015, under Resolution 30/1, Sri Lanka co-sponsored a landmark commitment to implement a comprehensive transitional justice framework, including truth-seeking, reparations, and institutional reforms.
However, the implementation of these pledges has been slow and uneven. By 2019, Sri Lanka formally withdrew its support for UNHRC Resolution 30/1, citing concerns over sovereignty and external interference. This has led to a deepening cycle with more demanding UNHRC resolutions being passed at regular intervals, broadening the scope of international scrutiny to the satisfaction of the minority, while resistance to it grows in the majority community. The recent Resolution 51/1 of 2022 reflects this trend, with a wider range of recommendations including setting up of an external monitoring mechanism in Geneva. Sri Lanka today stands at a critical juncture. A new government, unburdened by direct involvement in past violations and committed to principles of equality and inclusive governance, now holds office. This provides an unprecedented opportunity to break free from the cycle of resolutions and negative international attention that have affected the country’s image.
KEEPING GSP+
The NPP government has emphasised its commitment to treating all citizens equally, regardless of ethnicity, religion, or region. This commitment corresponds with the spirit of the UN system, which seeks not to punish but to promote positive change. It is therefore in Sri Lanka’s national interest to approach the UNHRC not as an adversary, but as a partner in a shared journey toward justice and reconciliation. Sri Lanka must also approach this engagement with an understanding of the shortcomings of the present international system. The West’s selective enforcement of human rights norms has bred distrust. Sri Lanka’s legitimate concerns about double standards are valid, particularly when one compares the Western response to Russia’s invasion of Ukraine with the muted responses to the plight of Palestinians or interventions in Libya and Iraq.
However, pointing to hypocrisy does not absolve Sri Lanka of its own obligations. Indeed, the more credible and consistent Sri Lanka is in upholding human rights at home, the stronger its moral position becomes in calling for a fairer and more equitable international order. Engaging with the UN system from a position of integrity will also strengthen Sri Lanka’s international partnerships, preserve crucial economic benefits such as GSP Plus with the European Union, and promote much-needed foreign investment and tourism. The continuation of GSP Plus is contingent upon Sri Lanka’s adherence to 27 international conventions relating to human rights, labour rights, environmental standards, and good governance. The upcoming visit of an EU monitoring mission is a vital opportunity for Sri Lanka to demonstrate its commitment to these standards. It needs to be kept in mind that Sri Lanka lost GSP Plus in 2010 due to concerns over human rights violations. Although it was regained in 2017, doubts were raised again in 2021, when the European Parliament called for its reassessment, citing the continued existence and use of the Prevention of Terrorism Act (PTA) and broader concerns about rule of law.
The government needs to treat the GSP Plus obligations with the same seriousness that it applies to its commitments to the International Monetary Fund. Prior to the elections, the NPP pledged to repeal the PTA if it came to power. There are some cases reported from the east where trespass of forest had been stated as offences and legal action filed under the PTA in courts which had been dragging for years, awaiting instructions from the Attorney General which do not come perhaps due to over-work. But the price paid by those detained under this draconian law is unbearably high. The repeal or substantial reform of the PTA is urgent, not only to meet human rights standards but also to reassure the EU of Sri Lanka’s sincerity. The government has set up a committee to prepare new legislation. The government needs to present the visiting EU delegation with a credible and transparent roadmap for reform, backed by concrete actions rather than promises. Demonstrating goodwill at this juncture will not only preserve GSP Plus but also strengthen Sri Lanka’s hand in future trade negotiations and diplomatic engagements.
INTERNATIONAL PARTNERSHIP
The government’s recent emphasis on good governance, economic recovery, and anti-corruption is a positive foundation. But as experience shows, economic reform alone is insufficient. Political reforms, especially those that address the grievances of minority communities and uphold human rights, are equally critical to national stability and prosperity. There is a recent tendency of the state to ignore these in reality and announce that there is no minority or majority as all are citizens, but which is seen by the minorities as sweeping many issues under the carpet.
Examples give are the appointment of large number of persons from the majority community to the council of Eastern University whose faculty is mainly from the minority communities or the failure to have minority representation in many high level state committees. Neglecting these dimensions risks perpetuating internal divisions and giving ammunition to external critics. The government’s political will needs to extend beyond economic management to genuine national reconciliation. Instead of being seen as a burden, meeting the EU’s GSP Plus obligations and those of UNHRC Resolution 51/1 can be viewed as providing a roadmap.
The task before the government is to select key areas where tangible progress can be made within the current political and institutional context, demonstrating good faith and building international confidence. Several recommendations within Resolution 51/1 can be realistically implemented without compromising national sovereignty. Advancing the search for truth and providing reparations to victims of the conflict, repealing the Prevention of Terrorism Act, revitalising devolution both by empowering the elected provincial councils, reducing the arbitrary powers of the governors as well as through holding long-delayed elections are all feasible and impactful measures. The return of occupied lands, compensation for victims, and the inclusion of minority communities in governance at all levels are also steps that are achievable within Sri Lanka’s constitutional framework and political reality. Crucially, while engaging with these UNHRC recommendations, the government needs to also articulate its own vision of reconciliation and justice. Rather than appearing as if it is merely responding to external pressure, the government should proactively frame its efforts as part of a homegrown agenda for national renewal. Doing so would preserve national dignity while demonstrating international responsibility.
The NPP government is unburdened by complicity in past abuses and propelled by a mandate for change. It has a rare window of opportunity. By moving decisively to implement assurances given in the past to the EU to safeguard GSP Plus and engaging sincerely with the UNHRC, Sri Lanka can finally extricate itself from the cycle of international censure and chart a new path based on reconciliation and international partnership. As the erosion of the international rules-based order continues and big power rivalries intensify, smaller states like Sri Lanka need to secure their positions through partnerships, and multilateral engagement. In a transactional world, in which nothing is given for free but everything is based on give and take, trust matters more than ever. By demonstrating its commitment to human rights, reconciliation, and inclusive governance, not only to satisfy the international community but also for better governance and to develop trust internally, Sri Lanka can strengthen its hand internationally and secure a more stable and prosperous future.
-
Business3 days ago
Pick My Pet wins Best Pet Boarding and Grooming Facilitator award
-
News3 days ago
New Lankan HC to Australia assumes duties
-
Features3 days ago
King Donald and the executive presidency
-
Business3 days ago
ACHE Honoured as best institute for American-standard education
-
News3 days ago
Lankan ‘snow-white’ monkeys become a magnet for tourists
-
Features5 days ago
The Truth will set us free – I
-
Business1 day ago
National Savings Bank appoints Ajith Akmeemana,Chief Financial Officer
-
Business5 days ago
Positive take on US-SL talks on tariff question buoys bourse