Amid rising global trade uncertainties and shifting geopolitical dynamics, Sri Lanka’s economic recovery appears to be on firm footing, supported by improved credit flow, rising tourism earnings, and stronger remittance inflows.

The Central Bank of Sri Lanka (CBSL) emphasized this encouraging economic outlook on Tuesday, downplaying the urgency for further monetary easing for now, despite growing external pressures such as the potential U.S. tariff hikes.

While the CBSL announced no change to its key policy interest rates—holding steady at 7.75%—the monetary authority placed greater focus on the ongoing growth momentum and economic stabilisation that followed months of painful reforms.

Governor Dr. Nandalal Weerasinghe, addressing the media after the latest Monetary Policy Review, said the decision was based on current economic indicators aligning well with CBSL’s forecasts. “As of now, we are moving in the right direction,” he said.

He reiterated that there is still room for future rate adjustments if required, especially depending on the outcome of negotiations with the United States over proposed tariff changes that could affect Sri Lankan exports.

“If expectations shift, we do have space to act,” he noted, adding that the CBSL is ready to implement both short-term and long-term strategies to manage any adverse impact from external shocks.

The CBSL noted that inflation remains on track to reach the 5% target, with signs of deflation easing and core inflation set to rise gradually, in line with recovering domestic demand. Recent trends in the Colombo Consumer Price Index (CCPI) have confirmed a positive direction, supported by growing credit flows and business activity.

Sri Lanka’s economy grew by 4.8% in the first quarter of 2025, and leading indicators suggest that this momentum will likely continue into the second half of the year. Broad-based credit expansion to the private sector—up 16.1% year-on-year—has been key to this rebound, helped by declining market interest rates following earlier rate cuts.

Dr. Weerasinghe assured that this growth is sustainable and not a sign of overheating, highlighting a notable shift in credit allocation away from State-Owned Enterprises (SOEs) toward the private sector.

Meanwhile, the external sector has shown resilience, despite a widening trade deficit. Foreign reserves remain stable, thanks to improved remittances and tourism receipts, as well as ongoing foreign exchange purchases by CBSL.

The recent disbursement of the fifth tranche of the IMF’s Extended Fund Facility in July further strengthens confidence.

CBSL concluded that while global policy uncertainty and trade disruptions pose future risks, it remains prepared to take necessary policy actions to anchor inflation expectations and sustain Sri Lanka’s economic recovery trajectory.

In a significant move to bolster its economic partnership with China amid rising global trade uncertainties, Sri Lanka will participate as a Special Partner Country at the 22nd China-ASEAN Expo (CAEXPO) from September 17–21 in Nanning, the capital of China’s Guangxi Zhuang Autonomous Region. This strategic engagement is expected to open new avenues for Sri Lanka’s exports and investments, especially vital as the country navigates the looming threat of increased U.S. tariffs on its exports.

The CAEXPO, one of Asia’s most influential trade platforms, brings together member nations of the Regional Comprehensive Economic Partnership (RCEP) and the Belt and Road Initiative (BRI) to foster economic collaboration. As a returning Special Partner Country—having held the role in 2016 (13th CAEXPO)—Sri Lanka is set to take center stage with a dedicated national pavilion, a product exhibition, and a country promotion event to showcase its trade potential.

A high-level Sri Lankan delegation led by senior government and diplomatic officials will participate in the event. Major Sri Lankan enterprises involved in port logistics, agriculture, spices, and manufacturing are expected to engage in business matchmaking and investment discussions with Chinese and ASEAN counterparts.

The timing of this partnership is critical. With Sri Lanka seeking to diversify its trade portfolio and attract foreign direct investment, its engagement with China—its largest bilateral creditor and a key infrastructure development partner—is of growing strategic importance. In 2023, China ranked among Sri Lanka’s top five trading partners, with bilateral trade exceeding USD 5 billion. Sri Lanka’s exports to China, though still modest compared to imports, have seen a gradual increase, particularly in tea, rubber products, gems, and spices.

The CAEXPO platform offers Sri Lanka an opportunity to expand its market access not just to China but across the ASEAN region, which collectively represents a consumer base of over 600 million people. The Special Partner Country status gives Sri Lanka enhanced visibility and diplomatic access at a time when global supply chains are shifting and Asian economies are seeking greater regional integration.

Sri Lankan officials view the expo as a vital gateway to unlock trade and investment opportunities beyond traditional markets. The nation is also exploring potential cooperation in renewable energy, digital trade, and logistics, sectors China has identified as key pillars of future growth.

As global economic realignments intensify, Sri Lanka’s renewed engagement with China and ASEAN through CAEXPO reflects a pragmatic pivot toward strengthening regional trade resilience.

The Central Bank of Sri Lanka (CBSL) has issued a stern warning to merchants across the country, reiterating that imposing surcharges on debit and credit card payments is illegal. The move comes amid a significant increase in consumer complaints regarding hidden fees levied by some retailers for electronic transactions.

In its latest public announcement, the CBSL stated that merchants are strictly prohibited from charging customers any additional fee—commonly ranging from 2.5% to 3%—when paying with cards. “If a merchant demands more than the listed price, customers should insist on a receipt and report the incident to their card-issuing bank,” a CBSL official emphasized during a post-Monetary Policy Review media briefing.

The clarification follows growing concerns over unfair trade practices as the country shifts rapidly toward digital payments. Many consumers have reported that retailers, especially in sectors like hospitality, health services, and vehicle maintenance, are adding unofficial charges for card payments—undermining the very goals of the digital economy initiative.

Sri Lanka currently witnesses approximately 1.6 million digital payment transactions daily, with about 800,000 transactions conducted through debit and credit cards. Another 600,000 payments are processed online, reflecting a steady rise in the adoption of digital payment systems. The CBSL noted that this growth is a positive indicator of the country’s progress toward a cashless society.

However, the imposition of unauthorized fees threatens this progress. The CBSL, along with the Ministry of Finance, has been working to increase public confidence in digital transactions by ensuring cost transparency and preventing the misuse of electronic payment platforms.

The central bank’s reminder also aligns with its broader efforts to promote financial inclusion and reduce the informal economy. Electronic transactions, when executed without hidden costs, enhance transparency, reduce the risk of cash-related fraud, and bring more small businesses into the formal banking system.

Industry analysts note that while some merchants claim card processing fees cut into their profit margins, these costs are already factored into the pricing structures agreed upon with payment service providers. Therefore, passing these costs onto consumers not only violates CBSL regulations but also risks sanctions, including withdrawal of payment terminal access.

 To bolster consumer protection, the CBSL urges the public to remain vigilant and report such violations. Plans are underway to collaborate with banks to streamline complaint mechanisms and impose penalties on non-compliant merchants.

As Sri Lanka embraces its digital future, ensuring fairness and accountability in card-based transactions remains central to building a trustworthy financial ecosystem.

Sri Lanka’s tea industry is showing signs of resilience amid rising global trade tensions, but looming U.S. tariffs threaten to undermine its export momentum, particularly in value-added segments.

As the United States mulls broader import duties on select Sri Lankan goods, the country’s flagship tea industry—which relies heavily on premium exports to Western markets—could face major headwinds, industry analysts warn.

The impact could be felt most in value-added tea products like packets and bags, which fetch higher margins and now form a critical component of Sri Lanka’s export basket.

Despite these concerns, Sri Lanka recorded its strongest tea export performance in four years during the first half of 2025, underpinned by robust demand and increased shipments to non-traditional markets.

 According to Customs data analysed by Asia Siyaka Research, tea exports reached 126.8 million kilograms (Mnkg) in the first six months, up 6% from 119.1 Mnkg in 2024. Export earnings surged to $743 million, the highest for a first half since 2014, when exports stood at 157 Mnkg generating $805 million.

A notable shift in export strategy is evident in the product mix. The average Free on Board (FOB) price per kilogram rose to $5.87, up from $5.77 a year earlier, largely due to a continued emphasis on value addition.

 Value-added tea now comprises 59% of total shipments. Packeted tea exports rose significantly to 46% of overall exports, up from 39%, while bulk tea dropped from 47% to 41%.

Tea bags remained stable at 10%, though volumes increased to 12.5 Mnkg, a 2% year-on-year gain. Meanwhile, instant tea saw the highest growth rate—23%, reaching 1.6 Mnkg.

In terms of destinations, Iraq retained its top spot with imports jumping 28% to 18.7 Mnkg. Libya emerged as a surprise performer, recording a 280% surge to 11.4 Mnkg, compared to just 3 Mnkg last year.

 However, Russia, once a dominant buyer, slipped to third place, importing 11.2 Mnkg, down from 13 Mnkg.

 These export successes come despite climatic challenges that hit tea production in June, showcasing the industry’s adaptability. But stakeholders caution that the progress may be short-lived if Sri Lanka loses access to tariff concessions, particularly in Western markets where value-added teas are popular.

As trade talks with the U.S. continue, the tea industry is watching closely. Any tightening of market access could compel producers to return to bulk exports, weakening profitability and undercutting the government’s push toward a higher-value export model.

Showers will occur at times in the Western, Sabaragamuwa and Central provinces and in Galle and Matara districts.

Several spells of showers may occur in the North-western province.

Strong winds of about (55-60) kmph can be expected at times over Western slopes of the central hills and in Northern, North-central, North-western and Central provinces and Trincomalee and Hambanthota districts. Fairly strong winds about (40-50) kmph can be expected at times elsewhere.

The general public is kindly requested to take adequate precautions to minimize damages caused by strong winds.

July 24, Colombo (LNW): In a landmark ruling that will have far-reaching implications for maritime regulation and environmental accountability in Sri Lanka, the country’s Supreme Court has issued a powerful judgment over the 2021 MV X-Press Pearl disaster, which has been recognised as the gravest marine pollution incident in the history of the Indian Ocean.

Delivering a strongly worded verdict, the Court held both the state and the vessel’s operating parties culpable, citing a catalogue of failures and negligence that led to widespread environmental devastation and economic hardship for thousands of Sri Lankans, particularly those in coastal communities.

One of the centrepieces of the ruling was a directive requiring the ship’s owners and operators to pay US$ 1 billion in compensation. This figure, the Court stated, was intended not only to account for the extraordinary environmental degradation but also to address the lasting socio-economic damage suffered by affected communities, especially among the island’s fishing population.

The disaster, which saw the MV X-Press Pearl catch fire and sink while carrying tonnes of toxic chemicals and plastic pellets, released over 70 billion plastic nurdles and hazardous substances into Sri Lankan territorial waters.

Beaches were blanketed in plastic, marine life was killed in vast numbers, and the livelihoods of thousands were left in ruins. The Court officially declared the incident the most severe marine pollution event ever recorded in the Indian Ocean.

In its judgment, the Supreme Court found that multiple state agencies had failed to take necessary precautions or respond in a timely and effective manner. The Marine Environment Protection Authority (MEPA), the Harbour Master, and several other officials were singled out for their lack of action.

The Court also made particular mention of former State Minister of Urban Development, Dr Nalaka Godahewa, highlighting his inaction during a critical period.

It ruled that the state’s failures amounted to a violation of citizens’ constitutional rights—particularly the right to equal protection under the law and the freedom to pursue lawful livelihoods. Fisherfolk, in particular, bore the brunt of these infringements, as large swathes of coastal waters became unusable for months, with some areas still affected to this day.

The judgment firmly reinforced the “polluter pays” principle, affirming that corporations engaging in hazardous shipping activities must be held financially and legally responsible for any damage they cause. The ship’s owners, charterers, and agents were all deemed jointly liable.

In a bid to ensure transparent and equitable distribution of the compensation, the Court ordered the creation of an independent high-level commission. This body will be tasked with channelling the US$ 1 billion in a manner that directly benefits those most impacted—particularly fishing communities—and prioritises ecological restoration efforts along the coast and seabed.

Beyond redress, the Court went a step further by calling for immediate legislative and institutional reforms. It recommended overhauling existing maritime and environmental safety regulations, ratifying relevant international conventions, and improving the country’s ability to respond swiftly to similar incidents in the future.