By: Staff Writer

July 08, Colombo (LNW): In a strategic move aimed at revitalising tourist spending and enhancing revenue collection through formal retail channels, the Sri Lankan Government has reintroduced the Tourist VAT Refund Scheme (TVRS). This long-anticipated revival is not only expected to improve the shopping experience for visitors but also stimulate the local economy, particularly in the retail and manufacturing sectors.

Prompt VAT refunds are a proven global practice that directly incentivises high-spending international travellers, particularly those seeking luxury goods such as gems, jewellery, and handicrafts.

For Sri Lanka, the timely implementation of a fully operational TVRS can significantly enhance its competitiveness against regional tourism markets like Thailand and Singapore, where refund schemes are seamlessly integrated into the airport departure experience.

The more tourists are encouraged to shop within formal retail networks due to the promise of VAT recovery, the greater the revenue inflows to the country—both through direct spending and enhanced tax compliance.

At a time when Sri Lanka is seeking to accelerate post-crisis economic recovery and attract high-value visitors, this initiative represents a practical, high-impact policy tool.

The Inland Revenue Department (IRD) officially reactivated the TVRS on Friday at a newly established VAT refund counter located in the Departure Terminal of Bandaranaike International Airport (BIA). The inauguration ceremony was attended by Industries and Enterprise Development Minister Sunil Handunneththi and Deputy Minister of Finance Dr. Anil Jayantha.

Under the revamped system, eligible tourists over the age of 18 who have stayed in Sri Lanka for less than 90 days may now reclaim VAT paid on purchases exceeding Rs. 50,000 (excluding tax), provided they meet the necessary documentation requirements. This system is expected to channel more transactions through the formal retail sector, reducing tax evasion while simultaneously encouraging larger tourist purchases.

The policy relaunch was endorsed by the President on March 14, following coordinated submissions by the National Gem and Jewellery Authority (NGJA) and the Industries Ministry. Minister Handunneththi highlighted the scheme’s dual benefits—supporting local industries while driving formal-sector compliance.

 He praised the NGJA for championing the initiative during the inaugural meeting of the Export Development Council of Ministers (EDCM) under the current administration.

The TVRS reintroduction complements broader efforts to position Sri Lanka as a premier tourist shopping destination while enhancing tax policy enforcement. Officials from the IRD, NGJA, and other state agencies were present at the launch event, signalling a cross-agency commitment to the success of the program.

If implemented effectively and promoted widely, the VAT refund scheme could mark a turning point in elevating Sri Lanka’s appeal to international travellers and strengthening its fragile fiscal position through more robust retail tax capture.

By: Staff Writer

July 08, Colombo (LNW): Sri Lanka’s Tourism Recovery Slows Amidst Ambitious Targets and Limited Promotion.

Sri Lanka’s tourism sector, once a key pillar of the economy, is showing signs of recovery in 2025 under the current administration. However, the pace remains insufficient to meet ambitious targets set for the year.

Despite a relative improvement compared to the crisis-hit years of the past, the industry still struggles to regain pre-pandemic momentum. 

Key challenges remain unaddressed—chief among them being weak global promotion, an over-reliance on a few source markets, and geopolitical uncertainties dampening long-haul travel. 

While the government touts progress, tourism industry stakeholders warn that current strategies fall short of producing sustained growth.

According to the latest data from the Central Bank, Sri Lanka’s tourism earnings in the first half of 2025 rose by 10% year-on-year (YoY) to $1.71 billion. However, this moderate rebound still lags significantly behind the country’s peak years.

 Earnings for January to June 2025 are down 22% compared to the same period in 2018 ($2.18 billion) and nearly 10% lower than 2019 ($1.9 billion), raising serious questions about the feasibility of reaching the government’s $5 billion year-end target.

Tourism revenue for June stood at $169.5 million, a 12% YoY increase, yet it marked the second-lowest monthly earnings for the year—outpacing only May’s $164.13 million. January 2025’s earnings of $400.66 million remain the highest so far this year, but still fall short of June 2018’s peak monthly revenue of $275.6 million.

The government aims to attract 3 million tourists by the end of 2025. However, as of June, only 1.16 million arrivals have been recorded. 

This means the country must draw in over 1.83 million tourists in the next six months—averaging around 305,000 arrivals per month, compared to the current average of 195,000.

 In June alone, 138,241 tourists visited Sri Lanka, an increase of 22% YoY, yet falling short of the 177,257 target.

To meet the $5 billion revenue goal, Sri Lanka would need to earn more than $3.28 billion in the second half of the year—requiring a monthly average of approximately $547.9 million. This is nearly double the current monthly average of $285.4 million. 

Based on the average tourist stay of nine nights and daily spending of $163, such a leap appears highly optimistic without a dramatic surge in arrivals or spending.

Tourism analysts warn that the mismatch between targets and actual performance is widening. They point to the lack of a comprehensive international marketing campaign, ongoing global travel uncertainty, and insufficient airline connectivity as critical barriers to growth. 

Industry insiders stress that without a strategic reset—focusing on sustainable promotion, diversified markets, and policy support—the sector may not only miss its 2025 goals but also risk stalling its fragile recovery.

By: Staff Writer

July 08, Colombo (LNW): Sri Lanka witnessed a significant surge in private sector credit in May 2025, as licensed commercial banks ramped up lending activity, while credit to the government from commercial banks saw a notable decline, according to the latest Central Bank data.

Private sector credit grew by Rs. 132.9 billion in May alone, up from Rs. 87.0 billion in April, signaling a renewed appetite for borrowing following a brief slowdown during the April festive period. In total, private sector credit rose by Rs. 494.5 billion during the first five months of 2025—compared to just Rs. 71.5 billion during the same period last year—marking a sharp acceleration in lending activity.

This robust expansion has pushed year-on-year private credit growth to 16.1 percent as of May, up from 15.2 percent in April, continuing a rising trend that began in late 2023 when the Central Bank commenced a monetary easing cycle. These favorable lending conditions emerged in mid-2023 as interest rates were slashed in response to falling inflation, allowing banks to extend more credit and businesses to access cheaper funds.

Further boosting confidence in the financial system were improvements in political stability and investor sentiment. The successful restructuring of Sri Lanka’s external debt and a clear electoral mandate in the Presidential and Parliamentary polls in 2024 reduced policy uncertainty. Consequently, the economy rebounded with a 5.0 percent GDP growth rate in 2024, followed by 4.8 percent growth in the first quarter of 2025—driven primarily by industrial activity.

The Central Bank also contributed to the momentum by cutting its benchmark policy rate by 25 basis points to 7.75 percent in May, aiming to drive lending rates further down and steer inflation toward the 5.0 percent medium-term target. Broad-based credit growth was evident across all economic sectors through March 2025.

However, the International Monetary Fund (IMF), in its recent fourth review of Sri Lanka’s economic reform program, warned of limited room for additional rate cuts, citing deflation primarily driven by supply-side improvements. The IMF also cautioned that external shocks could still necessitate further easing of monetary policy.

While private credit expanded, credit to the government from commercial banks dropped by Rs. 53 billion in May. Analysts view this as a healthy development, as it reduces the crowding-out effect on private sector borrowing. However, the Central Bank’s credit to the government unexpectedly jumped by Rs. 123 billion in the same month. This figure, often seen as a proxy for money printing, raised some concerns, although it may also reflect valuation changes in the Central Bank’s portfolio or liquidity adjustments.

Economists warn that excessive reliance on monetary tools such as rate cuts and indirect signaling, without transparency, risks undermining market confidence and reserve accumulation. They draw parallels to previous currency crises, particularly in 2018 and the 2015–2016 period, when similar monetary missteps—amid claims of “rate space” and denial of classical economic principles—triggered capital outflows and currency instability.

 Despite tax hikes and improved fiscal controls post-crisis, Sri Lanka must remain vigilant. Analysts advise cautious management of long-term government securities, particularly under the Central Bank’s 5 percent inflation framework, to avoid re-triggering systemic financial risks.

July 08, Colombo (LNW): Sri Lanka’s official reserves experienced a noticeable contraction in June 2025, as reported by the Central Bank in its latest update on key economic indicators.

The total value of reserve assets stood at US$ 6.08 billion at the end of June, reflecting a fall of US$ 206 million compared to the previous month’s figure of US$ 6.29 billion.

This 3.3 per cent decline is largely attributed to a reduction in the country’s foreign currency holdings, which dropped from US$ 6.23 billion in May to US$ 6.02 billion in June.

Analysts suggest this downward movement signals continued pressure on the island nation’s external finances, even as authorities strive to stabilise the broader macroeconomic environment.

By: Isuru Parakrama

July 08, Colombo (LNW): The Central Bank of Sri Lanka (CBSL) has announced the auction of Treasury Bonds amounting to Rs. 200 billion, scheduled to take place on Friday (11).

The move is part of the government’s broader debt management strategy aimed at raising funds through domestic financial markets.

According to the official notice issued by the Public Debt Department of the CBSL, the auction will comprise three series of Treasury Bonds: Rs. 75 billion under the 10.35%2029 ‘A’ series, another Rs. 75 billion under the 09.00%2033 ‘A’ series, and Rs. 50 billion under the 10.25%2034 ‘A’ series.

Investors are invited to submit bids through registered Primary Dealers using the electronic bidding platform provided by the Central Bank.

The bonds will be issued on a clean price basis, excluding accrued interest, which ranges from Rs. 1.08 to Rs. 3.39 per Rs. 100, depending on the series. Settlement of the bonds is scheduled for July 15, 2025. The bonds carry annual coupon rates of 10.35%, 9.00%, and 10.25%, respectively, with semi-annual interest payments.

The Central Bank has reserved the discretion to accept bids for amounts below or up to the full value offered for each bond series, depending on prevailing market conditions. Interested investors, including members of the public, may participate in the auction through the following authorised Primary Dealers: Bank of Ceylon, Capital Alliance PLC, Commercial Bank of Ceylon PLC, First Capital Treasuries PLC, HNB Securities Ltd, NSB Fund Management Co. Ltd, People’s Bank, Sampath Bank PLC, Seylan Bank PLC, and WealthTrust Securities Ltd.

Each bid must be for a minimum of Rs. 5 million and thereafter in multiples of Rs. 1 million. Bids must be submitted by 11:00 a.m. on July 11.

Investors also have the option of purchasing Treasury Bonds in the secondary market through Primary Dealers or any other Licensed Commercial Bank.

July 08, Colombo (LNW): The Sri Lankan government has pledged to implement a nationwide property tax beginning in the first half of 2027, as part of a sweeping economic reform package agreed upon with the International Monetary Fund (IMF).

Work is already underway to establish the necessary data infrastructure to support the rollout of the new tax, which will apply to real estate holdings across the island. Officials expect the measure to generate approximately Rs. 56 billion in its inaugural year, with that figure projected to more than double to Rs. 122 billion by 2028.

In a formal communication to IMF Managing Director Kristalina Georgieva, President Anura Kumara Dissanayake—who also holds the finance portfolio—reaffirmed his administration’s full commitment to the reform agenda supported by the Extended Fund Facility (EFF).

Amongst the government’s stated priorities are a shift towards revenue-led fiscal consolidation, rationalisation of public spending, and reforms to ensure cost-reflective pricing in the energy sector. These measures are to be implemented alongside strengthened social protection systems to shield vulnerable segments of the population from potential adverse effects.

The government has also reaffirmed its intent to carry out a carefully calibrated debt restructuring plan to safeguard long-term fiscal sustainability. Other focal points of the reform framework include ensuring exchange rate flexibility, rebuilding foreign reserves, maintaining financial sector stability, and advancing anti-corruption and governance reforms.

Additionally, the administration is pursuing broader structural reforms aimed at unlocking the country’s long-term economic potential, with an emphasis on increasing efficiency, transparency, and resilience across key sectors.