By: Staff Writer

August 07, Colombo (LNW): Sri Lanka’s tea industry — long famed for its premium “Ceylon Tea” brand — is bracing for fresh challenges as the United States implements a new tariff structure from August 7, potentially undermining the country’s competitiveness in one of its key export markets.

Under the revised US tariff system, Sri Lankan tea exports will now be subjected to a 20% import duty, erasing the previous zero-duty advantage the country once enjoyed.

While this places Sri Lanka 5% ahead of India, which will now face a steep 25% tariff, it finds itself at a disadvantage compared to key African competitors. Kenya, one of the largest exporters of CTC (Crush, Tear, and Curl) tea, will enjoy a significantly lower 10% tariff, while Malawi faces a 15% rate.

Industry stakeholders, particularly the Tea Exporters Association (TEA), have expressed concern that this 10% tariff gap with Kenya could seriously affect Sri Lanka’s tea bag segment in the US, where Kenyan teas dominate the CTC blends used in popular tea bags

“Kenya is already a major supplier of CTC teas to the US and is now gradually expanding its orthodox tea production — an area Sri Lanka has historically led. With a 10% tariff advantage, Kenya could become a strong competitor in both segments,” the association warned.

Although Sri Lanka remains on par with tea exporters like Vietnam, Taiwan, and Indonesia — with tariffs ranging from 19% to 20% — the impact on Sri Lankan exports is expected to be more pronounced due to the country’s relatively higher price point.

Ceylon tea typically commands a premium in global markets, priced $1–$1.50 higher per kilogram compared to other origins. While this premium has historically been supported by Sri Lanka’s reputation for quality, legacy branding, and origin authenticity, the new tariff regime could amplify cost concerns for importers.

“Under zero-duty conditions, the pricing difference was manageable,” the TEA noted. “But with the 20% duty, Ceylon tea becomes significantly more expensive, forcing buyers to rethink sourcing decisions — especially in the middle-market segment.”

In April, several US orders were temporarily suspended following the initial tariff announcement, although they were later cleared after the US government introduced a temporary 10% baseline rate for 90 days. However, exporters fear this relief is only temporary and that longer-term competitiveness will hinge on other strategic measures.

Looking forward, industry experts stress the need for Sri Lanka to pivot towards value-added exports — including flavored and specialty teas — to differentiate its products beyond raw price considerations. The TEA has urged the government to lift restrictions on the import of ingredients and spices required for value addition, noting that blending with herbs and flavors could open new market segments and offset the impact of higher tariffs.

“Tea producers in Sri Lanka must innovate and embrace product diversification to survive in the evolving trade environment,” the TEA emphasized. “The future of Ceylon Tea in markets like the US will depend less on price, and more on quality, branding, and value-added innovation.”

As the global tea trade landscape shifts, Sri Lanka finds itself at a crossroads. With rising competition from both Africa and Asia, the country’s once-unrivalled tea industry must adapt rapidly — or risk ceding ground in key export markets.

By: Staff Writer

August 07, Colombo (LNW): Sri Lanka is pushing ahead with its strategy to boost foreign exchange earnings by encouraging value addition in its lucrative spice industry, with the government approving four local firms to operate as ‘approved enterprises’ under the spice re-export scheme. This move comes amid a notable surge in spice and essential oil export earnings during the first half of 2025, which rose by 29.64% year-on-year to US$ 208.53 million, according to data released by the Export Development Board (EDB).

The top-performing spices contributing to this increase include cinnamon, pepper, and cloves. Cinnamon exports rose by 25.01%, pepper by 26.86%, and cloves saw an extraordinary growth of 277.67% compared to the same period last year. These figures reflect a growing global demand for Sri Lanka’s high-quality spices and essential oils.

At the weekly Cabinet media briefing held on Tuesday (6 August), Cabinet Spokesman and Minister Dr. Nalinda Jayatissa announced that Stay Naturals Ltd., Verger Naturals Ltd., Plant Lipids Lanka Ltd., and HDDES Extracts Ltd. have been granted “approved enterprise” status for the processing and re-export of selected spices in the form of essential oil extracts, oleoresin, and spice residue.

These approvals follow the procedures established under the Import and Export Regulations No. 10 of 2021, and a Cabinet decision made on 18 December 2023. Under this regulatory framework, eligible companies are permitted to import selected spices from abroad, process them using local value addition methods, and re-export the finished products.

Among the spices targeted for value addition and re-export are cinnamon, black pepper, cardamom, nutmeg, mace, clove, and lemongrass. These are typically transformed into high-value derivatives such as essential oils, spice oleoresins, and herbal extracts, which are in high demand in the global food, cosmetics, pharmaceutical, and wellness industries.

To ensure quality and traceability, companies participating in the scheme must enter into supplementary agreements with the Board of Investment (BOI). These agreements include strict commitments on product standards, export volumes, and compliance with traceability protocols.

While the scheme offers promising opportunities for foreign revenue inflows and domestic industrial expansion, industry stakeholders have raised concerns about the time-consuming licensing procedures and lack of transparency regarding eligible spice types. Notably, when asked to disclose the list of selected spices, the Cabinet Spokesman declined to provide details.

Nevertheless, the initiative reflects a broader shift in Sri Lanka’s export strategy—from raw material exports to value-added re-exports—which could position the country as a key player in the global spice extract market.

By: Staff Writer

August 07, Colombo (LNW): Online gambling is fast becoming a major concern in Sri Lanka, with increasing numbers of local youth being drawn into unregulated betting platforms—many linked to international operators and criminal syndicates. With easy access via smartphones and targeted advertising, young Sri Lankans are falling prey to the promise of fast cash amid tough economic conditions and limited job opportunities.

The rise of websites such as 1xBet, FairPlay, Lotus365, and SkyExchange—all of which offer easy access to casino games, sports betting (especially on cricket), and digital slot machines—has made online gambling a normalized yet dangerous habit among Sri Lanka’s tech-savvy younger generation. These platforms, operating with little or no regulation, often use pop-up ads and influencer marketing, sometimes disguised as cricket sponsorships, to attract new users.

Just yesterday (August 5), the growing concern translated into action, as Thalangama Police raided a location in Akuregoda, arresting eleven Indian nationals allegedly involved in online gambling operations. The suspects—eight males and three females aged between 22 and 43—were found using laptops, tablets, and 20 mobile phones to manage gambling activity. They were remanded by the Kaduwela Magistrate’s Court until further investigation.

This is not an isolated case. In 2024, police dismantled two major operations in Hanwella, arresting over 50 foreign nationals, including 30 Chinese, six Thai, and four Indian citizens. The raids uncovered over 500 mobile phones, dozens of laptops, and a range of communication and digital devices allegedly used in cyber scams and financial fraud.

Experts warn that the spread of online gambling poses deeper threats beyond addiction. According to global studies, including from the Center for Strategic and International Studies (CSIS), the Southeast Asian online gambling industry has become a hotbed for transnational crime, money laundering, and digital fraud. Criminal networks exploit the vulnerabilities of addicted users—including public officials, law enforcement personnel, and even military staff—potentially compromising national security.

In Sri Lanka, where cybersecurity laws remain weak and public awareness minimal, these gambling operations are thriving in the shadows. The country is yet to implement robust regulations like those seen in Singapore, Indonesia, or Laos, where governments are cracking down on illegal digital betting. In contrast, Philippines and Cambodia have turned into online gambling hubs, attracting both revenue and controversy.

The Sri Lankan government now faces the urgent task of crafting policy, strengthening cyber regulations, and launching public education campaigns to stem the growing tide of gambling addiction and financial exploitation. Without immediate action, the unchecked rise of online gambling could spiral into a national crisis—particularly for the country’s younger generation, already bearing the brunt of economic hardship.

By: Staff Writer

August 07, Colombo (LNW): Sri Lanka’s fiscal deficit narrowed significantly in the first half of 2025, driven by a strong surge in government revenues and tighter expenditure control, according to the Finance Ministry’s latest Fiscal Review Report.

The report revealed that the budget deficit fell by 32.3% year-on-year to Rs. 405.6 billion during January to July 2025. This marked a notable improvement from the Rs. 598.9 billion recorded during the same period last year, reflecting the Government’s adherence to its economic stabilisation programme under the IMF-backed reform agenda.

A key factor behind this improvement was a 24.7% increase in total revenue—including grants—which reached Rs. 2.3 trillion, compared to Rs. 1.8 trillion a year earlier. Major gains were reported in income and value-added tax (VAT) collections.

Income tax revenue rose by 9.2% to Rs. 489 billion, while VAT receipts jumped by 27.6% to Rs. 876 billion. In total, government revenue collection by mid-year represented 46.9% of the annual target, with the Inland Revenue Department contributing the largest share at 48.2%, followed by Customs at 45.6%.

The re-opening of vehicle imports played a major role in revenue growth. Excise Duty from motor vehicles surged by 335.6% to Rs. 129.1 billion, following the lifting of import restrictions on 1 February. This trend also reflected in VAT on imports, which rose 34.3% to Rs. 354 billion, and Special Commodity Levy collections, which increased by 70.5% to Rs. 77.6 billion.

However, not all Excise categories performed equally. While liquor taxes rose by 9.2% to Rs. 108.2 billion, cigarette-related Excise revenue declined by 17.9% to Rs. 44 billion.

The IMF, in its Fourth EFF Review, cautioned against over-reliance on vehicle import revenues, which accounted for nearly 80% of revenue gains in 2025 so far. The Fund emphasized the need for contingency plans to protect medium-term fiscal sustainability if this revenue stream falters.

Total government expenditure during the period rose by 10.9% to Rs. 2.7 trillion. Recurrent expenditure increased by 13% to Rs. 2.5 trillion, while interest payments alone grew by 10.7% to Rs. 1.2 trillion. In contrast, capital expenditure and net lending dropped by 8.6% to Rs. 224 billion.

Highlighting concerns over under-execution of capital spending, the IMF noted weaknesses in project prioritization and urged the use of its upcoming Public Investment Management Appraisal (PIMA) technical support to improve project planning and delivery.

The mid-year fiscal performance underscores both progress and continued challenges in Sri Lanka’s economic recovery path.