By: Staff Writer
November 24, Colombo (LNW): Sri Lanka’s economic recovery remains fragile despite pockets of improvement, with new expert commentary warning that policy missteps especially on interest rates risk prolonging the country’s crisis. Three years after the 2022 sovereign default, the country is still grappling with deep structural vulnerabilities, slow growth, and continuing social distress, even as official indicators point to stabilising external balances.
Sri Lanka continues to face its most severe economic downturn since independence in 1948. The fiscal tightening and austerity measures introduced as part of the IMF programme have helped reduce inflation and rebuild reserves, but they have also pushed large sections of the population into hardship.
Poverty has surged to 24.5% in 2024, more than double the 2019 level of 11.3%, while malnutrition, youth unemployment and rising school dropout rates suggest long-term, intergenerational consequences. Real per capita GDP is not expected to regain its 2018 levels until at least 2026, underscoring the slow pace of recovery.
The central tension within the economy today stems from contradictory conditions: sharply reduced inflation alongside some of the highest real interest rates in the region. According to the Central Bank of Sri Lanka’s August 2025 Monetary Policy Report, headline inflation has stayed below the 5% target for three consecutive quarters, moving only slightly above zero in the third quarter after dipping into negative territory earlier in the year. Yet the benchmark interest rate remains elevated at 7.75%.
This policy stance is now drawing major criticism. Professor Arjun Jayadev, Director at the Center for the Study of the Indian Economy at Azim Premji University, argues that maintaining such high real interest rates—despite low inflation and weak employment is “fiscal self-harm, not prudence.” He notes that Sri Lanka’s employment-to-population ratio has fallen by four percentage points since 2017, a clear sign that the economy is operating far below its potential.
Jayadev further warns that high interest rates threaten the country’s debt sustainability. With debt levels near 100% of GDP, even small increases in interest costs can widen the debt burden. Drawing a comparison to Greece’s post-2010 experience, he highlights how austerity can backfire when economic contraction outpaces debt reduction pushing economies deeper into crisis rather than stabilising them.
He also points out that Sri Lanka’s inflation is driven largely by food prices—which account for 35% of household expenditure—and are influenced more by global markets and supply disruptions than by domestic demand. This weakens the argument for keeping interest rates high to manage inflation.
Importantly, Sri Lanka’s external position has strengthened. The central bank projects a current-account surplus in 2025, official reserves have surpassed USD 6 billion, the rupee has been stable since the 2022 devaluation, and money markets show excess liquidity conditions that typically support monetary easing rather than tight policy.
Jayadev argues that maintaining a 7.75% policy rate benefits external actors at the expense of domestic recovery and warns that if tight monetary policy triggers another downturn, even foreign creditors stand to lose. With the economy returning to 4.9% growth in the second quarter of 2025, he believes the window for policy correction is open.
“Economies escape debt traps through growth, not endless austerity,” he stresses calling on the central bank to cut interest rates and support a more balanced, growth-oriented recovery.
Sri Lanka’s Economy Strains as Experts Urge Policy Shift
Maldives–Sri Lanka Talks Set to Reset Economic Partnership
By: Staff Writer
November 24, Colombo (LNW): Maldives President Mohamed Muizzu is scheduled to arrive in Colombo in the second week of December on an official invitation extended by President Anura Kumara Dissanayake, in a visit that is expected to significantly reshape economic cooperation, investment flows, and regional political alignment between the two Indian Ocean neighbours.
According to diplomatic sources, at least six memoranda of understanding (MoUs) covering trade, investment promotion, tourism collaboration, and information sharing are set to be signed during the three-day visit.
The visit comes just four months after President Dissanayake travelled to Malé and signed two important agreements: a Mutual Legal Assistance Treaty and a diplomatic training MoU between the Maldivian Foreign Service Institute (FOSIM) and Sri Lanka’s Bandaranaike International Diplomatic Training Institute (BIDTI).
This renewed exchange of high-level visits after several years of geopolitical turbulence in Malé signals a deliberate effort to stabilise and expand bilateral ties.
Sri Lanka and the Maldives have long maintained a cordial but understated relationship grounded in shared membership in the Commonwealth, SAARC, and the Indian Ocean Rim Association. Economic engagement, however, has historically remained modest.
Annual trade averages around USD 40 million, dominated by Sri Lankan exports of apparel, ceramics, processed food, and construction materials. The Maldives, heavily reliant on imports, represents a niche but stable market for Sri Lankan manufacturers.
Tourism and health travel form another critical pillar. While Sri Lankan tourists frequently visit Maldivian resorts, thousands of Maldivians travel to Colombo each year for medical treatment, education, shopping, and business. Strengthening these sectors through new MoUs could boost revenue for Sri Lankan hospitals, education institutions, airlines, and SMEs if implemented effectively.
However, analysts note that the real strategic significance of Muizzu’s visit lies in economic diplomacy and investment. With the Maldives aggressively seeking foreign capital for infrastructure and housing projects, Sri Lankan construction companies, energy firms, and logistics operators could position themselves to capture new contracts.
Conversely, Sri Lanka, now stabilising after years of economic crisis, hopes to attract Maldivian investors to its hospitality, real estate, and port-related ventures.
Politically, the visit is being closely watched given President Muizzu’s 2023 election campaign, which emphasised an “India-Out” stance and a renewed tilt towards China’s Belt and Road Initiative.
Since taking office, some of the anti-India rhetoric has softened, but the Maldives’ shifting geopolitical alignment still affects regional dynamics. Strengthening ties with Sri Lankatraditionally a neutral and pragmatic partne offers Malé a way to diversify its diplomatic footprint and reduce overdependence on any single major power.
For Sri Lanka, reinforcing relations with the Maldives is equally important. Colombo seeks to project stability and economic recovery, and deeper engagement with a wealthy tourism-driven neighbour can support foreign exchange inflows, create investment confidence, and enhance its role as a regional hub for education, healthcare, and aviation.
As both countries confront economic uncertainty and geopolitical competition in the Indian Ocean, President Muizzu’s December visit has the potential to transform a historically quiet partnership into a more strategic and mutually beneficial alliance if the promised MoUs translate into tangible results.
Audit Exposes Massive Revenue Leakages at Sri Lanka Customs
By: Staff Writer
November 24, Colombo (LNW): Sri Lanka Customs tasked with ensuring efficient import and export operations while securing government revenue has been found to be mired in administrative lapses, opaque financial practices, and weak internal controls, according to 2024 National Audit Office report released in 2025.
The report focuses on Customs’ complex network of internal funds, including the Reward Fund, Management & Compensation Fund, and the Overtime & Cargo Examination Fund, along with several sub-funds. While these were intended to support operational efficiency, auditors discovered minimal oversight and policy guidance, creating incentives for personal gain over national interest.
One alarming finding relates to penalty sharing: only 30% of net penalties reach the Consolidated Fund, often less than the customs duty owed. Between 2012 and 2023, Rs. 14.53 billion reached the Treasury, while Rs. 24.22 billion was paid to officers and informants.
Reward practices also fail legal requirements: for 35 years, payouts were made without Finance Minister approval, and routine operational detections were categorized as “offence detections” to justify bonuses. Attendance tracking remains outdated, relying on handwritten registers despite 2017 biometric mandates, while 90% of overtime payments go to officers, leaving only 10% for the state.
Major penalties between 2017 and 2023 were arbitrarily reduced, causing revenue losses of Rs. 181.5 million. The report highlights systemic weaknesses that undermine the integrity of one of the country’s most important revenue-generating institutions. The NAO stresses the need for immediate reforms to prevent further financial leakage
BYD Hosts Media Tour in China Amid Local EV Controversy
November 24, Colombo (LNW): Sri Lankan journalists from leading newspapers and prominent social media influencers were recently invited on an extensive tour of BYD’s operations in China, sources disclosed.
Insiders suggest that BYD is planning to organise a second delegation once the current group returns to Sri Lanka.
The initiative appears aimed at providing first-hand insight into the company’s operations and innovations, following recent debates over electric vehicle imports managed by BYD’s local distributor, John Keells.
Observers note that such tours are increasingly being used by corporations to engage directly with media and social platforms, potentially shaping public perception in response to controversies surrounding import practices and product quality.
CPC Reviews Global Oil Surge as Sri Lanka Prepares for Next Fuel Price Adjustment
November 24, Colombo (LNW): The Ceylon Petroleum Corporation is closely analysing the sharp rise in international oil prices, as global market volatility continues to mount, Daily Mirror reported citing a senior company source.
During its routine evaluation of refined fuel prices, the state energy supplier has observed a steady climb in crude and product rates throughout the first three weeks of November. Industry regulators attribute this trend to a combination of seasonal demand and geopolitical strain.
According to CPC analysts, the onset of winter in major consumer regions has pushed energy consumption upward, while increasingly strict sanctions on Russia—one of the world’s key oil exporters—have further tightened supply. The official, who declined to be named, noted that restrictions imposed on more than 100 vessels carrying Russian fuel have intensified pressure on shipping routes and contributed to the global price uptick.
Even so, rumours of fresh negotiations between Moscow and Kyiv prompted a small dip in prices around November 22, offering brief relief to jittery markets by easing concerns about extended supply disruptions.
Sri Lanka typically imports two to three consignments of fuel each month, and the CPC is now reviewing the latest data before finalising its next domestic price update. The corporation continues to apply a cost-reflective pricing formula to ensure that local pump rates mirror shifting conditions in the international energy market.
Lack of Support Leaves Vulnerable Young Women Drifting into Sex Trade, Group Warns
November 24, Colombo (LNW): A Sri Lankan social welfare organisation has raised alarm over the growing number of young women leaving state-run probation and child detention centres who find themselves with so few options that they end up turning to sex work soon after they turn 18.
According to H. A. Lakshman, Executive Director of the Praja Shakthi Development Foundation, many of these girls arrive at such institutions after suffering severe neglect, harassment, or sexual abuse, while others are placed there simply because they have no parents or stable home environment.
Once released, he said, they are left to fend for themselves with little training, no financial cushion, and almost no guidance.
Lakshman added that the absence of structured vocational support means many struggle even to secure basic employment. Faced with immediate economic pressure, some turn to sex work as the only readily available source of income.
Others, upon returning to unsafe environments, encounter further exploitation, making it even harder for them to break away from the cycle.
He stressed that the foundation does not compel these young women to abandon their current means of survival but stands ready to work with the government on any initiative that provides safer, more dignified opportunities.
Approximately 10,000 female sex workers are currently registered with the organisation, many of whom entered the trade shortly after leaving state care.
Deputy Minister of Women and Child Affairs Namal Sudarshana acknowledged that precise figures are difficult to track but admitted that girls leaving detention at 18 often do so without guardians, mentors, or community support.
He noted that the government is considering extending their stay in such centres until the age of 20 or 21, giving them more time to access stability and training.
Planned programmes include vocational instruction in areas such as baking, beauty therapy, and courses leading to NVQ qualifications—efforts aimed at helping these young women step into the workforce with genuine skills rather than desperation.
Thousands Facing Years-Long Wait for Heart Operations at Colombo National Hospital
November 24, Colombo (LNW): Almost 5,000 people awaiting cardiac procedures at Colombo National Hospital are facing delays so severe that some may wait as long as four years before undergoing life-saving surgery, according to Dr Chamal Sanjeewa, head of the Doctors’ Trade Union Alliance for Medical and Civil Rights.
Drawing on figures released through the Right to Information Act, Dr Sanjeewa said the hospital’s cardiac units are overwhelmed, with individual waiting lists running into the hundreds—and in one ward, well over two thousand. The length of the queues, he warned, places already vulnerable patients at considerable risk.
Many of those waiting come from families with modest means and have no realistic alternative to state care, as private-sector heart surgery typically costs upwards of Rs. 2 million. “For a significant number, the danger is not just the delay but the possibility they may never reach the operating theatre in time,” he cautioned.
Dr Sanjeewa also criticised the government’s budget priorities, noting the absence of targeted assistance from the President’s Fund for patients in urgent need of cardiac interventions. He urged authorities to provide immediate relief and to treat the growing surgical backlog as a national health emergency.
Although the government has announced plans for a 16-storey cardiac complex at the Colombo National Hospital, only Rs. 200 million has been earmarked for the project—an amount Dr Sanjeewa said falls far short of what is required to make a meaningful impact on the crisis.
AI Deep fakes Lure Sri Lankans into Costly Investment Scams
By: Staff Writer
November 24, Colombo (LNW): A chilling new wave of cybercrime is sweeping across Sri Lanka, as scammers use artificial intelligence (AI) to create convincing deep fake videos featuring well-known business leaders, government officials, and celebrities all promoting fake investment schemes that promise extraordinary returns.
At first glance, these slick videos look genuine. Shot as professional “interviews” in Sinhala and seamlessly dubbed into fluent English, they feature familiar faces appearing to endorse financial products or digital platforms. Many of the ads promise staggering profits even claiming returns of up to US$ 12,000 for a US$ 100,000 investment enough to tempt ordinary citizens struggling with the rising cost of living.
But behind these convincing faces lies deception powered by AI. The Central Bank of Sri Lanka (CBSL) has now sounded the alarm, warning that such videos are “entirely fake and artificially generated.” The Bank stressed that it does not promote or support any private investment, crypto currency, or deposit scheme.
“These scams are dangerous because they exploit public trust,” said an officer from Sri Lanka CERT, the country’s main cyber security agency. The technology has become so real that at times, even for a trained eye, it’s tough to figure out. People should understand that anything that seems too good to be true probably is.”
Most of these deep fakes are created overseas by powerful AI tools that can clone voices and facial expressions, according to cyber security analysts.
]Once created, the clips are circulated through Facebook, YouTube, and other social media platforms targeting Sri Lankan users. The intent is simple to build trust using familiar faces and persuade people to deposit money into fraudulent schemes.
Victims are usually led to professional-looking websites or messaging platforms such as WhatsApp or Telegram, where they’re persuaded to invest in dollars or crypto currency. In many cases, they’re shown fake dashboards displaying impressive “profits” to convince them to invest even more. Once significant sums are transferred, the fraudsters disappear without a trace, leaving behind financial ruin and emotional distress.
CBSL’s Financial Consumer Relations Department is urging citizens to be extremely cautious and verify any investment offer through official banking channels. “We encourage the public to report such fake promotions immediately by contacting the Central Bank hotline 1935 or Sri Lanka CERT,” the Bank said in its latest advisory.
Experts fear that as AI technology continues to evolve, these scams could become even more sophisticated and harder to detect. The Central Bank has categorically denied any involvement in such promotions and reiterated that all official communications are released only through verified channels.
“This is not just a cybercrime issue it’s a growing social problem,” a cyber-security expert noted. “People are losing not only their savings but also their confidence in digital information. Combating these scams requires both awareness and caution.”
As AI continues to blur the lines between real and fake, Sri Lankans are being urged to think twice before believing what they see online and to place their trust only in verified financial institutions regulated by the CBSL.
Sri Lanka to Benefit from NZ Expertise in Manufacturing and Innovation
By: Staff Writer
November 24, Colombo (LNW): New Zealand government agency, NZ Product Accelerator (NZPA) charged with helping businesses overseas is ramping up efforts to strengthen ties with Sri Lanka by providing expertise and connections to help develop and commercialise new products and technologies, a senior expert of the agency divulged
It is ready to connect in areas like manufacturing, design innovation, and agricultural technologies with research expertise to address industry or market needs and, at the same time, try and accelerate the development of innovative products and processes in the country, a Senior Materials Expert at the NZPA Dr Karnika De Silva said.
She was in the island on a short visit to establish contacts and help Sri Lankan businesses identify and connect with relevant research expertise within New Zealand’s network.
In doing so, the NZPA brings together over 100 experts from nine research organizations, i.e., 7 universities across New Zealand, facilitating this integration, she disclosed.
“We also tap into our national network of over 300 researchers across eight universities and Crown Research Institutes (CRIs) to identify the right mix of expertise, capabilities, and facilities” Dr Karnika said. .
The New Zealand manufacturing industry is a SME based economy with only a few vertically integrated large companies, so any Innovative technologies by SME will have a significant contribution to the economic growth, she explained
“The NZ Product Accelerator helps businesses, especially SMEs, to define and de-risk their R&D investments, delivering practical solutions faster.
In this contex, EML Consultants Sri Lanka has entered into an agreement with NZPA to adopt its model into its operations through collaboration
This process includes introducing advanced manufacturing through NZ Product Accelerator expertise in automation, digital twins, sensing, robotics, and implementing “AI” in manufacturing, monitoring air pollution, and making sustainable material choices to meet economic, social, and environmental challenges in manufacturing.
EML connects directly with NZPA with relevant NZ research expertise in materials, manufacturing, process integration, or bio-innovation to deliver the test pilot solutions collectively, so that EML can scale or implement its regional projects, in collaboration with or without NZPA.
“In addition, we can introduce our supply chain or value chain stakeholders to EMl for fast delivery of the targeted objectives to their clients” she said.
This collaboration allows EML to tap into NZ’s deep science and engineering expertise within a wider network of expertise in NZ as a one-stop shop while building a track record of inclusive, high-impact innovation in developing markets—delivering mutual benefit to both parties and the communities in both countries they serve.
Ceylon Shipping at Crossroads: Reviving a National Maritime Asset
By: Staff Writer
November 24, Colombo (LNW): Once regarded as a cornerstone of Sri Lanka’s maritime identity, the Ceylon Shipping Corporation Ltd (CSC) stands today as a reminder of both resilience and risk within the state enterprise landscape.
After weathering years of operational and financial storms, the corporation’s return to profitability in 2023/24 offers a glimmer of renewal but also exposes the fragility of its recovery.
CSC’s journey mirrors the fate of Sri Lanka’s broader public sector: burdened by legacy inefficiencies yet striving to redefine its purpose in a global shipping industry transformed by competition, technology, and economic uncertainty, several shipping sector experts said.
CSC was originally set up to serve the country’s import and export shipping needs, with the vision of retaining foreign exchange by reducing reliance on foreign carriers. Operating vessels such as Ceylon Breeze and Ceylon Princess, its income streams today come from voyage earnings, vessel leasing and charter-hiring.
In 2023 alone, the company reported earnings of Rs 878.67 million from voyage income and Rs 5,336.83 million from charter hiring, shipping ministry sources revealed.
But beneath these headline numbers lies a more fragile reality. CSC still carries negative net assets, a clear warning flagged repeatedly in its audit reports, they added.
The primary burden stems from a US$ 70 million loan plus US$ 5.44 million in capitalised interest secured in 2016, used to purchase its two ships.
With the rupee depreciating by 12.4 percent in FY 2023, CSC recorded a massive exchange loss of Rs 2,811.9 million, eroding much of its operational turnaround.
Moreover, despite the 2016 Cabinet decision (No CP/16/0035/737/003) and Public Finance Circular No 415 directing all government importing agencies to prioritise CSC, the policy has been largely ignored.
Between 2021 and 2023, over 300 waivers were granted allowing agencies to bypass CSC and use other shipping providers a major blow to its revenue base and the very purpose of its establishment.
Officials at the Ministry of Ports, Shipping and Aviation are aware of this predicament. As noted in parliamentary documentation, the Ministry remains committed “to make Sri Lanka a service supply centre with maximum competition,” signalling intention to revitalise the shipping sector.
Yet implementation remains weak. A high official of the ministry stated that it has to “ensure that strategic assets such as CSC are firmly embedded within national logistics policy.”
CSC has attempted to diversify exploring container feeder services to Bangladesh and Oman, passenger/ferry operations, and bunkering ventures at Colombo but momentum is slow. Financial constraints, foreign debt exposure, and bureaucratic inertia continue to hold back progress.
External pressures such as port congestion at the Sri Lanka Ports Authority’s Colombo terminal and global shipping disruptions increase its risk profile.
If Sri Lanka wishes to keep CSC as a viable national asset rather than yet another loss-making SOE, decisive intervention is needed.
The government must enforce its import policy, ensuring that all state and donor-funded imports are channelled through CSC, and back it with fiscal and institutional support, shipping sector exper said. .
A strategic partnership model combining private management expertise and state ownership would bring flexibility and innovation to an otherwise stagnant enterprise, he pointed out. .
Investment in digital platforms, optimisation of fleet utilisation, and integration of CSC into the broader Indian Ocean regional logistics network can unlock latent potential.
Without such reforms, the company risks drifting further into irrelevance, losing not just revenue but strategic control over maritime logistics and foreign-exchange flows, he emphasised.