Fitch Ratings has raised concerns about the financial health of Sri Lanka’s state-owned banks, warning that their capital levels remain weak despite strong profits in 2024. This is mainly due to a mandatory capital reserve they must maintain to cover risks from restructured foreign loans given to the government.

According to Fitch, the Central Bank has instructed banks to set aside a special reserve equal to 15% of their outstanding foreign currency loans and bonds to the government, which were recently restructured.

This reserve is not counted as part of the banks’ capital, directly affecting their capital adequacy ratios. The rule applies for six months from the end of 2024, but Fitch expects further regulatory measures to follow.

This move hits state banks hardest, particularly Bank of Ceylon (BOC) and People’s Bank (PB), which together had to allocate 72% of their profits—equal to 2.2% of risk-weighted assets—toward this special reserve. Without this requirement, their capital ratios would have increased by about 2 percentage points.

Fitch noted that over two-thirds of these restructured loans originated from a state-owned enterprise, and they accounted for around 14% of the banks’ combined loan books and 7% of their total assets. These loans were restructured as part of the broader sovereign debt restructuring completed in 2024.

Despite the financial strain, state banks are not expected to fail. Their high exposure to the government—more than half of their assets—continues to tie their financial health closely to the state. However, Fitch warns that if the risk weights on these foreign loans were raised to 100%, the Tier 1 capital levels of BOC and PB could fall below 10%, a potentially worrying threshold.

With this in mind, attention is now turning to the government’s 2023 budget, which allocated Rs. 450 billion for possible support to state banks and other sectors. There is growing speculation that a portion of this amount could be infused into BOC and PB during 2025 to shore up their capital base and help meet regulatory buffers.

Fitch said the long-term pressure on these banks will ease if lending shifts more toward the private sector and less toward the government. However, in the short term, state support may be necessary to keep them compliant and stable.

The strong national ratings of the state banks still reflect their dominant market share—over one-third of sector assets and deposits—and solid funding through wide branch networks and close government ties. But Fitch made it clear: without capital infusion or regulatory relaxation, their vulnerability will remain a key concern.

In contrast, large private banks like Commercial Bank and Hatton National Bank faced a much smaller impact, as their exposure to government debt—mostly through international sovereign bonds—was lower, making up just 3.2% of assets.Private banks were also able to reverse some provisions set aside earlier for potential losses from government bond exposure. Initially, they had provisioned about 52% of their holdings, but after the final losses turned out to be only around 30%, the excess was written back, boosting profits

The “Siri Dalada Vandanawa,” the special exposition of the Sacred Tooth Relic, will conclude on Sunday (April 27) as previously scheduled and will not be extended, according to Pradeep Nilanga Dela Bandara, the Diyawadana Nilame of the Sri Dalada Maligawa.

In a special statement issued, he noted that the event had seen a larger-than-expected turnout of devotees. “We have been fortunate to have more devotees worshipping than planned,” he said.

He added that the city of Kandy has become extremely crowded due to the influx of devotees from across the country. This situation has created difficulties for many in accessing the opportunity to venerate the Sacred Tooth Relic.

“At the same time, we had to face obstacles in providing facilities in terms of environment and hygiene,” the Diyawadana Nilame explained. He further emphasized that, for the convenience and safety of the public, the decision was made to conclude the exposition on April 27 as initially announced.

The ‘Siri Dalada Vandanawa’ began on April 18, offering both local and international devotees a rare chance to pay homage to the Sacred Tooth Relic. This year’s 10-day exposition marks the first public display of the relic in 16 years.

A malaria awareness march was held yesterday (25) under the theme “Say No to Malaria,” organized by the National Malaria Campaign of the Ministry of Health and Mass Media. The march was led by Dr. Anil Jasinghe, Secretary to the Ministry, and commenced from the Ministry’s premises, proceeding to Viharamahadevi Park in Colombo.

This event marked the 12th anniversary of Sri Lanka’s sustained malaria elimination and was part of the observance of World Malaria Day 2025. Despite the country’s successful elimination of malaria, travelers to endemic countries remain at risk, and the march aimed to raise awareness about preventive treatments and the importance of post-travel screenings.

After the walk, a public awareness session was held at Viharamahadevi Park, where Dr. Jasinghe explained the Ministry’s continued efforts to control and prevent malaria. He emphasized that both vector control and early detection and treatment are essential in eradicating the disease. He also highlighted the challenge of identifying imported malaria cases, comparing it to the difficulty of identifying terrorists, stressing the importance of proactive measures and scientific knowledge.

Dr. Prasanga Serasinghe, Director of the Malaria Control Campaign, noted that awareness programs are being conducted nationwide for World Malaria Day. Although Sri Lanka was declared malaria-free by the World Health Organization in 2016, recent cases have emerged among individuals who traveled abroad. In 2023, 62 malaria cases were recorded, 38 in 2024, and 14 cases have been reported so far in 2025. Symptoms of malaria include fever, headache, body aches, and in severe cases, difficulty breathing.

The march was attended by key officials, including the Director General of Health Services, Dr. Asela Gunawardena, and various health specialists, as well as representatives from the International Organization for Migration and field staff.

Showers or thundershowers will occur at most places of the island during the afternoon or night. The Intertropical Convergence Zone (where winds from the Northern Hemisphere and Southern Hemisphere converge) affects the island’s weather.

Several spells of showers may occur in coastal areas of the Western province and in Puttalam, Mannar, Galle and Matara districts in the morning.

Fairly heavy falls about 75 mm are likely at some places in Central, Uva and Eastern provinces and in Vavuniya and Polonnaruwa districts.

The general public is kindly requested to take adequate precautions to minimize damages caused by temporary localized strong winds and lightning during thundershowers.

Misty conditions can be expected at some places in Centraland Uva provinces and in Ampara district during the morning.

Sri Lanka’s tea export earnings in the first quarter of 2025 climbed 5% year-on-year (YoY) to $370.9 million, marking the highest Q1 performance in over a decade, according to Asia Siyaka Commodities PLC. Export volumes also rose modestly, reaching 63.2 million kilograms, up from 62.3 million kilograms in Q1 of 2024.

The average Free on Board (FOB) value per kilogram for the quarter was $5.87, exceeding last year’s $5.69. In rupee terms, however, total earnings dropped slightly to Rs. 109.9 billion from Rs. 110.9 billion, largely due to the strengthening Sri Lankan Rupee, which appreciated from Rs. 313 to around Rs. 296 against the US dollar.

The value-added segment of exports saw notable growth, increasing its share to 56% of total shipments, compared to 53% last year. This rise was driven by higher volumes in packaged tea, tea bags, instant tea, and green tea categories. March alone saw tea exports totaling 23.43 million kilograms, an increase of 2.18 million kilograms from the same month in 2024. Although tea bags slightly declined, other product categories recorded year-on-year growth.

In terms of pricing, the March FOB value per kilogram in rupee terms dropped to Rs. 1,753.16 from Rs. 1,795.87. Yet in dollar terms, the average rose slightly by $0.04 to $5.92. Over the quarter, the average FOB in rupees declined by Rs. 40.63 compared to last year, though it reflected a $0.19 gain in US dollar terms.

Iraq remained Sri Lanka’s top tea export destination, increasing its purchases by 7% to 9.02 million kilograms. Russia followed with 6.33 million kilograms, slightly below the previous year’s figure. Libya experienced a dramatic surge, importing 5.31 million kilograms compared to just 1.03 million kilograms last year—a 416% increase.

Other key markets presented mixed results. Exports to the UAE dropped 35% to 4.54 million kilograms. Turkey imported 3.32 million kilograms (down 19%), while Chile saw a 41% rise to 3.07 million kilograms. Iran imported 2.78 million kilograms, slightly ahead of China’s 2.47 million kilograms. Saudi Arabia and Germany were also notable importers, with 2.23 million and 2.22 million kilograms respectively.

Despite a marginal drop in rupee revenue, the strong performance in export volumes and rising dollar-denominated earnings reflect a positive outlook for Sri Lanka’s tea industry moving forward, supported by increased demand and a growing share of value-added products.