By: Staff Writer

November 03, Colombo (LNW): Sri Lanka’s statutory and non-statutory funds being operated by various government institutions including ministries currently are to be absorbed into the consolidated fund before July 31 this year, the finance ministry circular revealed.

Statutory funds are established by law for specific purposes while non-statutory funds created by executive action or regulations rather than being explicitly mandated by law.

The aim of merging it and bringing it under treasury is to streamline public finance management. The process involves winding up non-statutory funds by the stated deadline.

Those funds previously managed separately will now be part of the central government’s financial resources. This is part of a broader effort to streamline government finances and improve financial management, according to the Treasury.

Some 210 such funds will be brought under the control of the treasury while shutting down a further 13 public funds in accordance with the provisions of the newly enacted Public Financial Management Act No.44 of 2024, which mandates the closure of all such unlinked state resources

A new system has been introduced to make changes on the scope, mandate and objectives of such funds to reflect the present day requirements under the direct and strict monitoring of the Treasury, a senior official on condition of anonymity told the Sunday Times Business.

All these funds will be made more efficient and transparent service providers, he said adding that it will raise the quality of the government’s fiscal policies.

A special committee appointed to look into the fund management has come to a conclusion that out of the total 210 funds reviewed, 105 funds have been identified as public funds, of which 10 funds have been identified as the highly impacted funds. Hence it requires further study to take policy decisions.

Based on the recommendations of the committee, 12 public funds have already been placed under the national budget department and it has identified that the continuation of 21 funds were not feasible to operate.

According to the Public Financial Management Act, any non-statutory fund should cease its operations from the date of coming into operation of the Act and will be dissolved within one year from such date, and those funds should be remitted to the Consolidated Fund.

In the event of winding up a non-statutory fund, the whole process will have to be completed before July 31 or early August this year, the treasury circular indicated.

The 13 funds listed to be closed are the National Botanical Garden Trust Fund, Judicial Infrastructure Maintenance Trust Fund, Road Maintenance Trust Fund, National Child Development Fund, Wild Life Trust Fund, Vehicle Emission Trust Fund, “Sisu Aruna” Scholarships Fund, “Mahindodaya” Scholarship Fund, “Sujatha Diyaani” Fund, Shipping Development Fund, Temporary Surplus Trust Fund, Self Employment Revolving Fund, and Dedicated Economic Centres Maintenance Fund.

By: Staff Writer

November 03, Colombo (LNW): In a decisive shift from fragmented donor-funded projects to a unified and strategic model, Sri Lanka has unveiled a major overhaul of its Official Development Assistance (ODA) framework under the new National Climate Finance Strategy 2025–2030, Finance Ministry sources revealed.

The strategy serves as the backbone for integrating donor commitments into the country’s national priorities focusing on building climate resilience, modernizing infrastructure, and mobilizing private investment.

The Ministry of Finance is now set to streamline the administration and disbursement of ODA, aligning it with international best practices to ensure funds are effectively channelled into key development areas such as renewable energy, sustainable water management, and coastal protection.

According to ministry data and donor announcements, Sri Lanka’s total ODA inflows for 2025 are projected to reach approximately US$4.7 billion, a significant increase compared to recent years. The surge stems from renewed engagement by major multilateral and bilateral partners.

The Asian Development Bank (ADB) is expected to allocate around US$900 million, while the World Bank Group’s multi-year package exceeds US$1 billion, with substantial commitments scheduled for 2025.

Further strengthening the funding envelope, India’s expanded grant assistance, estimated at US$780 million, and contributions from other bilateral partners and specialized climate initiatives have positioned Sri Lanka for one of its strongest ODA years in recent memory.

Officials emphasized that each of these financing streams whether loans, grants, or blended instruments will now be strategically aligned with the government’s long-term reform agenda. The Treasury and the Department of External Resources will prioritize bankable projects consistent with the Climate Finance Strategy, ensuring that development efforts produce tangible and sustainable outcomes.

A centralised monitoring mechanism will be introduced to track ODA utilization, while regular public impact reports are expected to enhance transparency and accountability. With donors increasingly focused on measurable results, Sri Lanka aims to demonstrate credible fiscal management and improved governance in external financing.

Oversight of concessional loans and blended instruments will fall under the Public Investment Committee, supported by capacity-building initiatives to strengthen institutional performance. Analysts note that the success of this reform will depend on how effectively the government can translate increased financial inflows into visible climate resilience and sustainable growth outcomes.

If implemented as planned with robust coordination, transparency, and accountability the 2025 ODA framework could mark a turning point, transforming donor support from short-term relief into a sustainable driver of Sri Lanka’s climate-resilient and inclusive economic growth.

By: Staff Writer

November 03, Colombo (LNW): The Government’s decision to double the Withholding Tax (WHT) on interest income to 10 percent effective April 1, 2025, has begun tightening the noose around the life savings of thousands of retired citizens who depend almost solely on bank deposit interest to live.

Inserted in the Inland Revenue (Amendment) Act No. 2 of 2025, the new tax law will make it mandatory for all banks and financial institutions to withhold 10 percent of interest income as advance, irrespective of the amount of annual income of the depositor.

The government has asked the citizens receiving less than Rs 1.8 million to give a declaration to banks and financial institutions not to deduct the 10 percent and the financial institutions are doing it

However, citizens getting more than 1.8 million up to Rs 4 million are the ones who are affected as WHT of 10% is more than the tax payable and since they are receiving more than 1.8 Mn cannot sign the declaration.

.While intended to strengthen revenue collection, the measure has unintentionally hit those least able to bear the burden, several senior citizens living off modest savings complained. .

They urged the government to

A senior with Rs. 3 million in fixed deposits now earns around Rs. 300,000 annually as interest, but faces an automatic deduction of Rs. 30,000 under the new system, they pointed out.

After applying the standard Rs. 1.8 million personal allowance, the actual tax payable may be less than Rs. 10,000.

Yet the Inland Revenue Department (IRD) holds the full Rs. 30,000, leaving the retiree to navigate a complex refund process that can stretch for months.

This system, taxes people beyond their true liability and expects them to beg for refunds later,” lamented Senaka Samaraweera a retired engineer from Galle . “For someone in their 70s, filling forms and visiting tax offices is not practical. Many of us just give up.”

Sri Lanka’s fiscal authorities are under immense pressure to raise revenue. The tax revenue has reached Rs. 3,400 billion by the fourth week of September, driven largely by new taxes and higher collection efficiency, finance ministry data shows.

As officials prepare the 2026 Budget, these disgruntled senior citizens called on President Anura Kumara Dissanayake provide some redress for their financial difficulty. With over a million elderly depositors contributing to government coffers through interest taxes, even a modest reform could restore faith and fairness in the system

A large group of retired public servants has appealed to the finance ministry to take corrective steps in the 2026 Budget. They recommended establishing a simple exemption declaration for low-income seniors at bank level and introducing automatic refund credits for overpayments within 60 days.

The group argued that “a fair taxation policy must balance fiscal need with compassion for ageing citizens who have contributed to the nation’s growth for decades.”

According to Census data, Sri Lankans aged 60 and above now account for nearly 18 percent of the population about 3.9 million people. Of these, analysts estimate around one million elderly depositors are currently subject to WHT deductions.

For many, this tax is not merely a fiscal inconvenience but a direct reduction in essential income used for food, medicine, and utility bills.

A national advocacy group for the elderly, has voiced deep concern over what it calls “a policy that taxes the vulnerable to fill budget gaps.”

In a recent statement, the organisation noted that the WHT revision “creates refund barriers so high that thousands of seniors will effectively pay more than their fair share.”

Economists and social policy experts are calling on the Government to urgently revisit the policy before the upcoming Budget.

A high official of the finance ministry, noted that withholding tax systems are intended to simplify compliance, not punish low-income savers. “When interest earnings form the only income for many seniors, automatic deductions without regard to thresholds distort the equity of the tax system,” he said.

In response to mounting public pressure, the Finance Ministry has introduced a special fixed deposit scheme offering an extra 3 percent interest rate for citizens over 60 with deposits up to Rs. 1 million, funded through a Rs. 15 billion state allocation.

However, this initiative only applies to new deposits and provides no immediate relief for those already over-taxed under the WHT regime.

By: Staff Writer

November 03, Colombo (LNW): Sri Lanka’s fragile economic recovery faces renewed stress as soaring vehicle imports drive a fresh wave of foreign exchange outflows and growing exposure among financial institutions through vehicle leasing. According to the Central Bank of Sri Lanka (CBSL), import spending on personal and commercial vehicles surged to US$ 286 million in September 2025, bringing the total bill for the first nine months of the year to a staggering US$ 1.2 billion.

Of this, personal vehicles accounted for US$ 227.5 million, while commercial vehicles made up US$ 58.7 million. The sharp import spike following the relaxation of pandemic-era restrictions has injected short-term momentum into the automobile market but triggered concerns over renewed pressure on foreign reserves and exchange rate stability.

Economists warn that the sudden rise in vehicle imports reflects a classic case of policy contradiction. After maintaining tight import controls to preserve foreign currency, Sri Lanka has now reopened the market without adequately managing liquidity or credit growth. “Each wave of import liberalisation increases dollar demand, creating pressure on the rupee and potentially undermining the Central Bank’s deflationary stance,” one analyst observed.

Vehicle imports have traditionally been a major revenue source for the government, contributing through customs duties, excise taxes, and VAT. However, the foreign exchange cost of these imports often outweighs fiscal gains, especially when importers use bank loans or leasing schemes, fuelling credit expansion. Banks and finance companies have intensified leasing promotions to capture the rising demand, further linking domestic credit growth to external imbalances.

Data from the financial sector shows a double-digit rise in vehicle leasing portfolios since mid-2025, driven largely by pent-up consumer demand and a rebound in business sentiment. Analysts caution that if the rupee weakens further, debt-servicing pressures could rise for both borrowers and lenders, creating risks for financial stability.

Overall imports in September 2025 hit US$ 2.05 billion, up sharply year-on-year, with intermediate goods—including fuel climbing 13.4% to US$ 1.18 billion, indicating higher production activity. Investment goods also grew 6.8% to US$ 346 million, but machinery imports dipped even as commercial vehicle purchases rose more than tenfold compared to last year.

The Central Bank has continued to purchase dollars US$ 177.3 million in September alone—to strengthen reserves. However, market participants note that these inflows are partly offset by excess liquidity and import-driven outflows. Experts argue that buy–sell swap operations, which inject rupees into the system, have unintentionally spurred lending that fuels import growth and rupee depreciation.

As Sri Lanka attempts to balance growth with external stability, the vehicle import boom underscores the fragile link between domestic consumption, credit expansion, and foreign exchange vulnerability a recurring policy dilemma that continues to challenge the post-crisis economy.

By: Staff Writer

November 03, Colombo (LNW): In a move that has sparked renewed scrutiny, the government has granted sweeping tax exemptions to four companies operating under the Colombo Port City project, despite earlier assurances to the International Monetary Fund (IMF) to suspend such incentives until a transparent legislative framework is enacted.

According to extraordinary gazette notifications 2445/2 through 2445/5, issued by President Anura Kumara Dissanayake on July 14 in his capacity as the Minister of Finance, Economic Stabilisation, and National Development, has granted tax exemptions under the Inland Revenue Act for a period of 35 years to four companies operating within the Colombo Port City.

All income, profits, and dividends distributed will be exempted from all taxes specified under this Act for the first twenty-five years and all payments made shall be exempted from the Withholding Tax specified under this Act for the first twenty-five years;

After the end of the aforesaid twenty-five year period, 50 percent incentive from the prevailing corporate tax rate specified under this Act will be given for a period of ten years

Ceylon Real Estate Holdings (Private) Limited (licensed on 03 May 2024), Clothespin Management and Development (Private) Limited (licensed on 28 March 2025), IFC Colombo (Private) Limited (licensed on 21 August 2024) and ICC Port City (Private) Limited (Licenced on 04 April 2025) were the companies that were eligible for tax relief.

These companies have been classified as “Authorised Persons” and “Businesses of Strategic Importance” and shall be entitled to long-term corporate income tax exemptions, VAT exemptions, customs duty exemptions, dividends tax exemptions, and exemptions of personal income tax for foreign employees.

This decision comes in direct disparity to Sri Lanka’s commitments under the IMF’s Extended Fund Facility (EFF), where the government agreed to suspend all new tax exemptions under the Port City and Strategic Development Projects (SDP) Acts until new, rules-based frameworks are introduced.

According to the IMF’s Fourth Review Staff Report (July 2025), the government has committed to not issuing additional exemptions under the outdated laws and bringing amendments to the Port City and SDP Acts to the House by October 2025 with the aim of enhancing transparency, accountability, and alignment with fiscal reform goals.

The IMF previously stated that discretionary tax relief had led to revenue losses, corruption risk, and investor mistrust, requiring the complete overhaul of exemption policy by appropriately set criteria and time limits.

Any backtracking, analysts further comment, would undermine world confidence and complicate Sri Lanka’s process of debt restructuring.

Sri Lanka has made a commitment to the IMF not to provide any tax exemptions or incentives or approving new projects under the Strategic Development Projects (SDP) Act and to refrain from exemptions under the Port City Act, between January and September 20, 2024.

Despite this assurance tax exemptions to 24 companies (four as Primary Businesses, three as Duty Free Businesses, and 17 as Secondary Businesses) were gazetted without consulting IMF staff, the present government has informed them via its Memorandum of Economic and Financial Policies released by the IMF on July 03.

The continuous structural bench mark of suspending tax exemptions will be removed in consultation with IMF staff upon successful amendments to the SDP and Port City Acts and regulations in September and October this year the government has pledged in its memorandum.

By: Staff Writer

November 03, Colombo (LNW): In a significant policy shift aimed at reducing reliance on the U.S. dollar, the Central Bank of Sri Lanka (CBSL) is advancing plans to introduce a direct renminbi (RMB) payment mechanism for trade with China. Governor Dr. Nandalal Weerasinghe said the move would modernise cross-border payment systems, lower transaction costs, and strengthen financial resilience in bilateral commerce.

At present, Sri Lankan importers convert rupees to U.S. dollars before settling payments in RMB, exposing them to multiple exchange-rate risks and higher processing fees. A direct RMB settlement pathway, Dr. Weerasinghe explained, would allow same-day transactions, eliminate intermediaries, and provide greater pricing stability for both importers and exporters.

To achieve this, the CBSL is exploring the establishment of a dedicated RMB clearing bank in Sri Lanka an offshore Chinese-authorised entity that would enable local banks and enterprises to open RMB accounts, settle payments directly, and conduct domestic RMB transactions without using foreign correspondent banks. Similar clearing facilities already operate in over 30 countries under Beijing’s global RMB expansion initiative.

The macroeconomic benefits could be considerable. According to the IMF, linking to an offshore RMB clearing bank can raise a nation’s share of RMB-settled transactions by up to six percentage points annually. For Sri Lanka struggling with constrained foreign exchange reserves and heavy import payments the move promises reduced dollar dependency, lower conversion costs, and improved reserve diversification.

China’s ambassador in Colombo has endorsed the initiative, noting that broader RMB use could support Sri Lanka’s recovery by mitigating foreign exchange volatility and boosting economic stability. Given that annual imports from China amount to several billion dollars, shifting part of that volume to RMB-denominated settlements would free U.S. dollar reserves for critical imports or debt obligations.

Dr. Weerasinghe also stressed that the system could attract more Chinese investors and exporters by providing smoother financial infrastructure and reinforcing trade confidence. However, he cautioned that the transition must be managed carefully to prevent over-reliance on China’s financial ecosystem.

Sri Lanka’s experience with a RMB 10 billion currency swap with the People’s Bank of China in 2021 highlighted both the opportunities and complexities of deepening financial ties with Beijing. A direct clearing mechanism could, in the long run, reduce the need for such emergency swap arrangements.

Ultimately, CBSL’s RMB settlement plan represents a bold step toward financial diversification and trade efficiency. If implemented with strong regulatory oversight and risk management, it could enhance Sri Lanka’s economic sovereignty while deepening strategic links with one of its largest trading partners.

By: Staff Writer

November 03, Colombo (LNW): Sri Lanka and the Netherlands are strengthening their century-old political and economic relationship, with both nations seeking to redefine cooperation as they approach the 75th anniversary of diplomatic ties in 2026. The second round of bilateral political consultations, held this week in The Hague, has underscored a new phase in this partnership one that blends historical reconciliation, maritime collaboration, and growing trade and tourism links with strategic geopolitical alignment.

The meeting was co-chaired by Dominique Kuhling, Director of the Asia and Oceania Department of the Netherlands’ Ministry of Foreign Affairs, and Sugeeshwara Gunaratna, Director-General of the Europe and North America Division at Sri Lanka’s Ministry of Foreign Affairs. Both delegations reaffirmed their commitment to shared values of democracy, maritime freedom, and cultural preservation key areas that now anchor bilateral ties.

At the forefront of discussions was the cultural heritage agenda, particularly the Netherlands’ ongoing effort to return colonial-era artefacts taken from Sri Lanka. Both sides hailed the active partnership between the National Archives of the Netherlands and the National Archives of Sri Lanka, which is engaged in conserving and digitising centuries-old Dutch-period documents. Officials described this process as a symbol of “healing historical legacies through cultural respect.”

Economically, the Netherlands remains one of Sri Lanka’s top ten tourism source markets and a key European trading partner. Discussions focused on expanding Dutch investments in tourism infrastructure, renewable energy, and port development, while encouraging collaboration between national chambers of commerce. The Sri Lankan delegation highlighted new investor incentives under the Board of Investment (BOI) and expressed readiness to deepen trade engagement with the Dutch private sector, particularly in logistics, shipping services, and sustainable agriculture.

Maritime collaboration emerged as a key strategic pillar. The Netherlands, known globally for its port engineering expertise, has been a long-term technical partner of the Sri Lanka Ports Authority (SLPA). Both parties agreed to strengthen cooperation in port development, coastal resilience, and maritime safety, aligning with Colombo’s ambition to position itself as the Indian Ocean’s logistics hub.

The consultations also addressed regional stability and security, with commitments to enhance cooperation within frameworks such as BIMSTEC and the Indian Ocean Rim Association (IORA). On the multilateral front, both sides discussed mutual support for candidacies within the United Nations system, reflecting their shared interest in a rules-based international order.

The meeting concluded with agreement to institutionalise these consultations at regular intervals to track progress. The Sri Lankan delegation included Ambassador Rekha Gunasekera, Dr. Nadeera Rupesinghe of the National Archives, and officials from the Ministry of Foreign Affairs. The Dutch side comprised senior foreign ministry officers overseeing Asian and cultural cooperation.

Analysts note that the renewed engagement between the two countries goes beyond ceremonial diplomacy. As Sri Lanka seeks post-crisis economic recovery, Dutch partnerships in trade, heritage restoration, and maritime technology could play a pivotal role in shaping a modern, resilient Sri Lanka–Netherlands relationship built on mutual respect and pragmatic cooperation