Features
The making of The Island

by Vijitha Yapa, Founder Editor, Sunday Island
The person at the other end of the phone calling from Nallur was very angry. “Mr Editor, you have killed me in your paper today”. I did not ask him where he was speaking from, as he may treat it as an insult. I did not know what he was speaking about and asked what story he was referring to and after listening to him, told him to call me back in half an hour. There were no ubiquitous mobile phones at that time nor easy access to telephones in the eighties.
The story revolved around the Coroner of Nallur, Mr Francis, committing suicide and Dr Watson performing the autopsy. The call was from Mr Francis who said it was the other way round. I asked the sub editor for the original story submitted by the Nallur correspondent and what the sub editor had edited and compared it with what had been printed in the Island that morning.
Mr Francis was correct. The Nallur correspondent had said that Dr Watson committed suicide and Coroner Francis performed the autopsy. I screamed angrily at the sub editor and asked him, “What the hell have you done? Why did you do this and what can I tell this Coroner?” The sub editor submitted his lame excuse. “I tried to contact the correspondent and could not get through to Nallur. This seemed a ridiculous story and I felt the Nallur correspondent had got it all wrong. Why should a medical doctor who makes pots of money commit suicide? I felt it is the coroner, a poorly paid public servant, who had every reason to commit suicide and changed the story to reflect that”.
It was the most incredible explanation and he was a senior sub editor. What could I do? I apologized to Mr Francis when he phoned and said I am carrying an apology to him in the next day’s newspaper. This is the only time I ever apologized to anybody because I am a strong believer that facts printed must be correct and the editorial staff should be fully responsible to see that the true facts should be followed to the letter. The story is recollected on the 40th anniversary of the Sunday Island and it is an indication of the trials we faced and the difficulties we encountered.
Upali Wijewardene asked me to be the Editor of the Sunday Island in March 1981 when I submitted my resignation as the Media Officer at the GCEC (Greater Colombo Economic Commission) he chaired. From April 1981 I had accepted an offer from Dow Jones and Co of USA to look after their interests by procuring advertisements for the Wall Street Journal and also to import and distribute the Asian Wall Street Journal in Sri Lanka.
But even by August he had not found anyone and he sent his Mercedes Benz to my residence and asked me to come immediately to his home. There he said, ” I want you to be the Founder editor of the Sunday Island which will be born on October 4, because I have confidence in you”. I felt very sorry because here was a man who had wealth and power but was frustrated because he could not find an editor.
I told him I will accept the offer for six months until he found another person but as I have started my own business it was difficult for me to devote full time to the newspaper. I asked for a virtually impossible five figure salary, the highest for any journalist , a car with a driver to take my children to school and since I had some commitments with some foreign newspapers for journalistic assignments I requested leave whenever the need arose. He said okay and “You can start tomorrow”. I told him that to start the newspaper I will need to recruit immediately and cannot waste time on red tape. He gave me permission to approach any journalist and where necessary to double their salaries on the condition that they start work immediately from the next day.
I contacted many of the well known journalists and asked them to come for an interview and basically within a week we had the staff. It was a bold move because we were asking people in secure jobs to give up their positions in other newspapers and commence work with us within 24 hours. Ours was an establishment which was not publishing any newspapers except a weekly cartoon paper. The majority of those approached had the faith to take the plunge and we began work immediately.
Because of the problems we faced there was not even a dummy copy which we could produce before the date of publication, October 4. But somehow the birth took place that day though the first issues did not reach the public in the morning but late in the evening. I had returned home about 1 o’clock in the morning having finished the editorial work and was shocked to find that even by the afternoon it had not even been printed!. I rushed to the press and found that the plates were never sent to the printing press in Homagama because the technical staff were found wanting. There were blank pages and I ordered that some ads should be repeated and also some articles and sent the pages.
Though late the paper was received very well. It was in colour and we were the first to do computer printing of a newspaper in Sri Lanka. The pages were clean and people appreciated the pictures and layout. Gamini Weerakoon was the deputy editor, Rienzie Wijeratne was the pictures editor and Ajith Samaranayaka was the editorial writer responsible for features.
Gamini Weerakoon’s wife Rajitha was working for the Sunday Observer and I had to tell Gamini to make sure he does not talk in his sleep.
We also got some people from the Times group.Some of them were the first females to be recruited to the Upali Group head office, an all male domain. The ladies who came from the Times newspaper sought permission everyday to go to Fort about midday. They never explained why and I had to finally ask them the reason for this as our transport was limited to one vehicle at that time. They all appeared as a delegation in my office and said sheepishly,” We have to go to Fort because there is no toilet for women at Upali’s!”. It is an area which we had neglected and I immediately phoned Mr Upali Wijewardene and within 24 hours a special toilet with locks in the male domain was made available to the ladies.
Within one month of our publication Mr Wijewardene came to the office and said, ” I want to start the daily newspaper from November 16″. I was lucky not to have suffered a heart attack as we still had teething problems. The technical office once came and asked me why I could not give Page one and the sports page two days earlier like the feature pages so that he could give the paper on time.
Mr Wijewardene would not change his mind to postpone the commencement of the daily. We gathered the staff together and told them the news, recruited more journalists and the newspaper began as scheduled on November 16, 1981. Mr Peter Harland from UK assisted us in those early days and veteran planter Leslie Dharmaratne was the CEO of Upali Newspapers. He had no experience in journalism and there were practical issues with regard to the staff. The staff wanted a festival advance but the CEO was quite adamant that it could not be done because there were very heavy expenses with the starting of the newspaper and no funds were available. This virtually led to a strike but luckily it was averted though one or two Sinhala journalists decided to leave or were asked to leave.
It is the exposures of corrupt practices in The Island which caught the interest of the readers and the circulation soared . Mr Upali Wijewardene was the ideal publisher as he did not interfere in running the newspaper. He thought that President J.R. Jayewardene will support him in his endeavour to become the MP for Kamburupitiya but unfortunately Prime Minister Ranasinghe Premadasa opposed it. This led to practical problems and Mr Wijewardene certainly did not help himself when replying to a query by Mervyn de Silva, editor of the Guardian and said his hero was SWRD Bandaranaike. J.R. Jayewardene was very annoyed and because of various difficulties, Upali Wijewardene decided to resign as the Director General of the GCEC.
When Hector Kobbekaduwa was chosen as the SLFP candidate for the presidential election in 1982 Mr Wijewardene felt that since Mrs Sirimavo Bandaranaike had been disqualified from running, the one person who should be contesting the elections from the SLFP was her son Anura Bandaranaike. Anura opposed this and said he could not go against the SLFP. Mr Wijewardene then suggested that Anura should form his own party and that the necessary finances for that operation could be found. But Anura did not take up the offer though it reached the ears of JR, who was visibly annoyed.
Perhaps one of the most sensational stories that the Sunday Island exposed was how foreign minister ACS Hameed had used funds from South Korea through the Sri Lanka High Commission in London. It was used to procure bagpipes for schools in Akurana in Mr Hameed’s electorate. JR and Mr Hameed were on an official visit to China at that time. Mr Hameed told me later it was an embarrassment to Mr Jayewardene who queried it and ordered Mr Hameed to credit all the money that he had in the special account to the President’s Fund.
Another important story was how cricketer Bandula Warnapura decided to take a rebel Sri Lanka team to South Africa. Officially Upali newspapers opposed that visit editorially but carried news of it. Minister Gamini Dissanayake was very annoyed by this and phoned me and told me to stop carrying news of these rebels and said the other newspapers had agreed to his request. I refused and said editorially we condemned the rebel tour but felt we could not ignore the need to inform our readers of what was happening in South Africa.
Mr Dissanayake was very annoyed and said, “If that is your attitude I am going to speak to you publisher”. I knew Mr Upali Wijewardene was not in Colombo that morning but that evening he phoned me and asked whether Gamini Dissanayake had asked me to stop publicity for the rebels and wanted to know my reactions to it. I told him the facts and what he said about contacting the publisher. Mr Wijewardene said he had told Gamini Dissanayake that he does not tell the minister what to do in Cabinet or how to run his ministry. He said he wanted Mr Dissanayake not to interfere in the running of his independent newspaper.
Mr Wijewardene then asked me what news we had of the Sri Lanka rebels in South Africa. I said that there was a picture by Reuters of Bandula Warnapura and colleagues emerging out of the airport in South Africa with their luggage loaded on trolleys. He asked me where I was placing the picture and I replied that it will be on page 14, the Sports page. He laughed and then said, “Why don’t you put it on page 1” . That was Upali Wijewardene, the man who feared no one.
Many of the journalists achieved fame through the pages of the newspaper. The paper was a beacon of hope to the minorities, specially the Tamils, who felt they were being hounded. One of the boldest decisions I made was to ask DBS Jeyaraj to begin a column in the Sunday Island and to call it “Behind the Cadjan Curtain,’ an adaptation of China’s bamboo curtain .The column was well read and well received.
Ajith Samaranayake was another great asset. The editorial he wrote in the newspaper soon after the 1983 July riots and the appeal to people for sanity and to think afresh was read out in full by Mr Maithripala Senanayake in Parliament. It was Ajith who asked Jeyraj who was working at Veerakesari, the Tamil newspaper, to apply for a job at the Sunday Island. I was impressed by the clean shaven Jeyaraj’s performance in the test I gave him and recruited him. Later DBS said that impish Ajith had advised him to shave off his moustache and beard as I did not like such growth on the faces of journalists, which he realised later was a complete lie.
Ajith had his flings through words and once got into an argument with Gamini Fonseka. Initially the articles from Gamini and from Ajith created interest but Gamini’s replies became a bit boring in the latter stages. I told Ajith the time has come to end the series. He agreed and I allowed him to do the final column. His final comment was brief but rich with content. He said he was stopping these arguments with Mr Gamini Fonseka because trying to convince him was like playing a Veena to a deaf elephant. Gamini never replied to that because to those who knew his history, knew there was a rich meaning in that one sentence pregnant with opportunities.
There are many more stories to tell but space and time are precious and tributes to the individual journalists who made the Sunday Island a paper the readers looked forward to read is difficult to put down on paper. But the rich history of the Sunday Island which began 40 years ago has to be recorded and I wish the Editor and journalists of the newspaper all the best for the future.
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.
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