By: Staff Writer
September 30, Colombo (LNW): Sri Lanka’s debt restructuring may be nearing completion, but the International Monetary Fund (IMF) has warned that the country’s recovery remains fragile without strict fiscal discipline and stronger public finance institutions.
A September 2025 IMF working paper titled “Sri Lanka’s Sovereign Debt Restructuring: Lessons from Complex Processes” paints a mixed picture one of cautious optimism shadowed by risks of relapse if fiscal management falters.
The paper highlights significant progress since Sri Lanka’s historic 2022 default. International bond spreads have narrowed to post-restructuring levels, and credit rating agencies have begun upgrading sovereign ratings.
Treasury Bill yields, which hovered above 20% during the crisis, have now fallen to around 8.5% by March 2025 and as of 28 August 2025, the 91-day Treasury Bill yield stood at 7.58 % and the 182-day Bill yield was 7.89 % . The government has shifted toward longer-term Treasury Bonds, easing short-term refinancing risks. Meanwhile, private credit has started to expand, signaling a gradual revival in confidence.
These gains, the IMF notes, stem largely from the combination of debt restructuring, improved monetary stability, and the introduction of fiscal laws such as the Public Finance Management Act and the Public Debt Management Act.
Together, these are intended to impose greater accountability and transparency in government spending. Yet the IMF cautions that “there is no room for slippage on the fiscal front,” urging policymakers to resist populist pressures as elections loom and growth remains subdued.
However, the IMF’s insistence on tight fiscal rules comes with economic trade-offs. For a country still grappling with fragile growth and recovering livelihoods, fiscal consolidation can weigh heavily on domestic demand.
According to the latest fiscal position report by the Ministry of Finance, the 2025 budget targets a deficit of about 6.7% of GDP looser than IMF recommendations but still challenging amid slowing revenue growth. Moody’s has warned that this slower pace of consolidation could limit investor confidence, while the IMF itself notes that 80% of expected revenue gains hinge on a single new measure leaving the fiscal plan vulnerable if collections fall short.
The Fund’s report also acknowledges that institution building will be a long, uncertain process. While legislation has been passed, the capacity of public agencies to conduct independent audits, cost-risk analyses, and transparent procurement remains limited. “Restructuring alone will not guarantee stability,” the paper stresses, calling for lasting reforms that embed fiscal prudence in day-to-day governance.
Early 2025 data suggests some stabilization, with the Central Bank’s February report noting a unified policy rate of 8% to support normalization. Yet growth remains modest, and any external shock such as a spike in oil prices or global financial tightening could upend fiscal forecasts. The IMF’s rigid conditions leave limited flexibility for countercyclical spending, which could be crucial if the economy faces renewed headwinds.
Negotiations with creditors also revealed structural weaknesses in coordination and transparency. Disputes over comparability of treatment and the design of state-contingent instruments delayed agreements, underscoring the complexity of Sri Lanka’s debt mix. While the domestic debt operation launched in 2023 helped ease immediate pressures, the IMF warns that sustaining debt sustainability will require consistent policy execution over several years.
In essence, Sri Lanka’s recovery under the IMF program rests on a delicate balance. The Fund’s directives have stabilized markets, lowered yields, and anchored expectations, but the price has been a loss of policy flexibility. With fiscal room tightening and growth still fragile, the challenge for Colombo is to prove that discipline need not mean austerity.
If the government can pair IMF-backed reforms with credible institution building, Sri Lanka may finally exit its cycle of boom and bust. But if revenue projections falter or fiscal discipline weakens, the very rules designed to save the economy could end up constraining its ability to grow
IMF’s Fiscal Straitjacket: Can Sri Lanka Balance Stability with Growth?
Rubber Industry in Crisis: SVAT Abolition Threatens Exports and Rural Livelihoods
By: Staff Writer
September 30, Colombo (LNW): Sri Lanka’s natural rubber sector, a key foreign exchange earner and rural employer, is facing what industry leaders call an “existential threat” following the government’s decision to abolish the Simplified Value Added Tax (SVAT) scheme from 1 October.
The Colombo Rubber Traders’ Association (CRTA) has warned that the move made without a fully tested refund mechanism could unleash severe cash flow shocks across the supply chain, crippling exporters, manufacturers, and tens of thousands of smallholder farmers.
According to CRTA Chairman Harin de Silva, removing the SVAT at this stage will “plunge the entire value chain into chaos,” as manufacturers and exporters will be required to pay VAT upfront on all transactions.
This, he said, would block billions of rupees in working capital that firms currently rely on to purchase raw rubber and sustain production. For smallholders, who depend on steady farm-gate demand, the impact could be immediate with reduced purchasing power pushing prices sharply down.
Sri Lanka’s natural rubber industry is already struggling. Data from the Rubber Research Institute show that total natural rubber production fell by nearly 10% year-on-year in the first half of 2025, reflecting erratic weather and declining replanting.
Meanwhile, export earnings from rubber and rubber-based products slipped by around 8% to USD 680 million between January and August 2025, according to the Central Bank’s external sector statistics.
Analysts warn that additional policy shocks could accelerate this downturn, threatening rural employment and foreign exchange inflows at a time when the economy is still under IMF supervision.
Small and Medium Enterprises (SMEs) in the rubber supply chain which handle latex processing, crepe production, and component manufacturing face the gravest risk. Many operate on thin cash margins and lack access to affordable credit.
The upfront VAT requirement, without a fast and reliable refund process, could leave them unable to meet payroll or purchase inputs. “If these SMEs collapse, it will destroy decades of local value-chain development,” de Silva cautioned, warning that the ripple effects could reach exporters and rural producers alike.
Export manufacturers, too, are voicing alarm. Already burdened by high energy costs and weakening global demand, rubber product exporters say tying up liquidity in VAT refunds potentially delayed beyond the Inland Revenue Department’s promised 45 days could cripple operations.
“Many companies simply cannot afford to have their cash blocked for more than a month,” de Silva noted. “This will force them to scale back production, delay payments, or even import raw materials, undermining local suppliers.”
Although the government has pledged a risk-based digital refund system, the CRTA points out that crucial elements such as e-invoicing and real-time verification remain incomplete. Without these, refund processing will likely lag, compounding cash-flow distress.
Industry experts argue that the government’s fiscal reforms, though aimed at improving transparency and revenue collection, risk backfiring if implemented prematurely. Rubber exports, once a cornerstone of Sri Lanka’s post-independence trade now stand at a critical crossroads.
The CRTA, along with other export chambers, has called for the SVAT phase-out to be deferred until a fully functional digital refund mechanism is operational, warning that hasty execution could reverse the fragile recovery in one of Sri Lanka’s most vital export sectors.
Sri Lanka, Japan Deepen Security and Economic Cooperation Ties
By: Staff Writer
September 30, Colombo (LNW): Sri Lanka and Japan have agreed to strengthen and expand their partnership across economic, security, and development fronts during President Anura Kumara Dissanayake’s official visit to Tokyo. The discussions took place on Sunday (29) with Japanese Prime Minister Ishiba Shigeru, marking a key milestone in bilateral relations under the Comprehensive Partnership framework.
Both leaders reaffirmed their commitment to closer collaboration in investment, infrastructure development, and regional stability. Prime Minister Ishiba commended Sri Lanka’s economic recovery under the International Monetary Fund (IMF) program and the progress made in debt restructuring. He pledged Japan’s continued support for Colombo’s reform agenda and fiscal stabilization efforts.
President Dissanayake expressed gratitude to Japan for its leadership as Co-Chair of the Official Creditor Committee (OCC), highlighting Tokyo’s early role in signing a bilateral debt restructuring deal in March 2025 the first among OCC members. The leaders emphasized that completing debt restructuring and maintaining reform momentum would help restore investor confidence and ensure sustainable growth.
The President also welcomed Japan’s decision to resume 11 previously signed yen loan projects in 2024, ahead of other creditors. Both sides noted the importance of steadily implementing major infrastructure projects, including the second phase of the Bandaranaike International Airport expansion, which aims to boost connectivity and tourism. They also underscored the significance of improving power transmission networks and advancing digital terrestrial television broadcasting under Japan’s financing.
Prime Minister Ishiba reiterated Japan’s commitment to supporting Sri Lanka’s anti-corruption drive and assisting post-conflict rehabilitation, particularly in the Northern and Eastern Provinces. The two leaders also discussed broader regional and global issues, reaffirming their shared vision for a “Free and Open Indo-Pacific” and a rules-based international order.
They further agreed on the importance of multilateralism, democracy, and transparent lending practices that safeguard debt sustainability. The discussions reflected growing alignment between Tokyo and Colombo on strategic and economic priorities amid shifting geopolitical dynamics in Asia.
President Dissanayake conveyed his sincere appreciation for Japan’s longstanding partnership and the warm hospitality extended during his visit. The meeting marked a renewed phase in Sri Lanka–Japan relations, underscoring mutual commitment to economic revival, regional cooperation, and sustainable development
Government Fast-Tracks National Digital ID System amid Readiness Questions
By: Staff Writer
September 30, Colombo (LNW): The Sri Lankan government has accelerated efforts to launch a nationwide Unique Digital Identity (SLUDI) system, a flagship initiative under its digital transformation agenda aimed at modernizing public service delivery, enhancing transparency, and enabling digital trust. The Digital Economy Ministry and the Information and Communication Technology Agency (ICTA) have begun selecting a local Managed Service Provider (MSP) to manage and operate the platform, marking a critical shift toward national ownership of the project.
The SLUDI system, funded under an Indian government grant, is currently being developed by a Master Systems Integrator (MSI). Once the system’s acceptance and security testing are completed, the MSI will hand over operational control to a Sri Lankan MSP. The transition, expected to begin in December 2025, will involve a six-month knowledge transfer period to ensure smooth continuity.
After the MSP assumes full responsibility, the Department for Registration of Persons (DRP) will launch nationwide collection of biometric and demographic data a process projected to start in the second half of 2026. This phase will mark the practical rollout of the digital ID, positioning it as a key enabler of e-governance, digital payments, and citizen authentication.
Officials say the SLUDI will underpin Sri Lanka’s broader shift to a digital economy by creating a secure, verifiable identity framework that can be integrated across key sectors such as finance, health, education, and public administration. “It’s not just an ID it’s the backbone for digital inclusion,” an ICTA official noted, emphasizing its potential to streamline services and reduce bureaucratic inefficiencies.
However, concerns remain over data protection, privacy safeguards, and institutional readiness. Experts warn that without a robust legal framework and independent oversight, centralizing citizens’ biometric data could expose them to surveillance and cyber threats. Civil society groups have also urged the government to ensure public consultation and transparency in the selection of the MSP, cautioning that mismanagement or weak cybersecurity could undermine public trust.
The ICTA recently issued a Request for Information (RFI) to evaluate the technical and financial capacity of local firms interested in managing the platform. Industry insiders say the challenge will be finding a provider with both cybersecurity expertise and long-term operational capability, given the project’s complexity.
While the government views SLUDI as a cornerstone of its “Smart Nation” strategy, successful implementation will depend heavily on the MSP’s competence and accountability. The transition from foreign-led implementation to local management represents both a milestone and a test one that could determine whether Sri Lanka’s digital future is built on innovation and trust, or hindered by technical and governance pitfalls.
A New Dimension in Sri Lankan Politics
By: Roger Srivasan
For seventy-five years, Sri Lankans were presented with two stark choices: head or tail, Green or blue, one of two entrenched parties that monopolised the political landscape. Generations of citizens, weary yet loyal, cast their votes in a system that left little room for genuine change.
But today, a new dimension has entered the political arena. It is not merely a third party — it is a movement. A force that stands resolutely against corruption, nepotism, and the scourge of the drug menace. It is a vision of clean governance and accountability, unshackled from the baggage of the past.
Unlike the tired politics of transactional loyalty and opportunistic shifting of allegiances, this new political dimension is defined by its integrity. Many of its supporters, including those who were once prominent figures in the traditional parties, have embraced it not out of expediency but conviction. They see in it a rare chance to reclaim the nation from decay and restore dignity to public life.
This new dimension is not just about politics — it is about principle. It is about the promise that the twin evils of corruption and narcotics shall be vanquished, consigned forever to history’s annals. It is about leaders whose legitimacy derives not from backroom deals but from the will of the people.
For the first time in living memory, Sri Lanka’s political horizon is expanding. A long-suppressed yearning for honesty, discipline, and national renewal now has a home. The people have discovered that they are not condemned to the old binary of head or tail — they can finally choose the whole coin, stamped with integrity.
This is the new dimension in Sri Lankan politics: a dimension of hope, of moral clarity, and of unyielding resolve.
SL to Establish Globally Recognised National Quality Infrastructure System
September 30, Colombo (LNW): Sri Lanka is set to launch a comprehensive national quality infrastructure (NQI) system aimed at aligning the country’s industrial and regulatory standards with globally recognised benchmarks, Minister of Science and Technology Dr Chrishantha Abeysena announced this week.
The Minister made these remarks at the opening of a two-day workshop held in Colombo, focusing on regulatory impact assessment and the strengthening of national quality systems. The event was organised by the Ministry of Science and Technology in collaboration with the United Nations Industrial Development Organization (UNIDO), with technical assistance from the European Union.
With the 2025 national budget earmarking a substantial investment towards this initiative, the government intends to roll out a high-functioning quality assurance framework that will apply across multiple sectors. The new system will cover everything from food safety and pharmaceuticals to industrial goods and both imports and exports, with a strong emphasis on raising the global competitiveness of Sri Lankan products.
At the heart of the initiative are four central pillars: standards, precise measurement systems, conformity assessments, and certifications. These are designed to work together to create a reliable and internationally credible framework for quality assurance and compliance.
A number of leading national institutions will play a central role in implementing the infrastructure. Among them are the Industrial Technology Institute (ITI), the Sri Lanka Standards Institution (SLSI), the National Engineering Research and Development Centre (NERDC), the Sri Lanka Accreditation Board, and the Department of Registrar of Companies. These bodies will be tasked with upgrading laboratory facilities, enhancing technical capabilities, and modernising infrastructure to support the ambitious targets set under the new framework.
Dr Abeysena stressed that strengthening the national quality infrastructure is not only a matter of compliance but a strategic step toward building an export-driven economy. “In today’s global market, product quality, safety, and consistency are non-negotiable,” he said. “If we are serious about expanding our footprint in international markets, our goods and services must meet the most rigorous global standards.”
To this end, the government has allocated Rs. 750 million to support the initial development and implementation of the system. These funds will go toward upgrading testing laboratories, enhancing research facilities, and improving institutional capacity across the involved agencies.
Online Platform Launched to Simplify Driving Licence Renewals in Sri Lanka
September 30, Colombo (LNW): A new digital system aimed at easing the renewal process for driving licences in Sri Lanka officially went live today (30th), marking a significant shift toward more accessible and streamlined public services.
The Department of Motor Traffic (DMT) has introduced the first phase of the online platform, allowing eligible applicants to begin the renewal process without the need to physically visit the DMT headquarters in Werahera. The move is part of a broader effort to modernise public administration and reduce congestion at government offices.
Under the updated procedure, those seeking to renew their licences can now obtain the required medical certificate at the National Transport Medical Institute (NTMI) in Nugegoda. Once certified, applicants will be issued a temporary licence on-site, and their details will be electronically transmitted to the DMT for further processing.
Sri Lanka Sets Ambitious Course Toward Digital Future at Inaugural AI Expo
September 30, Colombo (LNW): Sri Lanka has reaffirmed its commitment to transforming into a digitally empowered nation, with an emphasis on education, innovation, and inclusive access to technology, Prime Minister Dr Harini Amarasuriya announced at the opening of the country’s first-ever National AI Expo 2025.
Addressing a gathering of innovators, educators, and tech industry leaders in Battaramulla, the Prime Minister highlighted that the cornerstone of this transformation lies in equipping the population with skills aligned with the demands of modern technology.
The National AI Expo, held on 29 and 30 September, brings together experts, businesses, and students under one roof to showcase and explore the rapidly evolving field of artificial intelligence.
Jointly organised by the Ministry of Digital Economy and Sri Lanka Telecom Mobitel, the event serves as a catalyst for AI integration across sectors, whilst also targeting early engagement by introducing AI tools to students and fostering partnerships between research institutions and private enterprises.
“Artificial intelligence is not merely an emerging field—it is already shaping the decisions we make as individuals, businesses, and governments,” Dr Amarasuriya noted during her keynote speech. “Our vision is not simply to adapt to this change, but to lead it.”
She outlined a bold roadmap to grow Sri Lanka’s digital economy to USD 15 billion by 2030, representing 12% of the national GDP. This includes a target of USD 5 billion in digital exports and the development of a skilled digital workforce of 200,000 professionals.
As part of this wider strategy, the government has designated September as ‘Digital Economy Month’—a move aimed at raising awareness and enthusiasm for digital transformation throughout the country. A series of exhibitions, workshops, and training programmes are being held to encourage the adoption of digital tools in both public and private sectors.
In the education sphere, reforms are already underway. Artificial intelligence, robotics, and environmental sciences are being added to the national curriculum, with a comprehensive effort to train 100,000 teachers and equip classrooms with smart learning technology.
“Empowering every citizen—from schoolchildren to entrepreneurs—with access to digital tools is essential. Our reforms are not just about infrastructure, but about fostering a new mindset,” the Prime Minister said.
Dr Amarasuriya also drew attention to several government-led digital service initiatives, including the expansion of GovPay for online transactions such as traffic fines, and the launch of aigov.lk, a national AI platform intended to support emerging sectors and streamline government services.
On the question of security and trust in the digital space, she confirmed that a national cyber security strategy and operations centre is currently being implemented to ensure safe access to e-services and digital markets.
The overarching goal, she stressed, is to position Sri Lanka as a regional hub for digital services in South Asia—an ecosystem where tech entrepreneurs, SMEs, and multinational investors can thrive in a connected, secure, and innovation-driven economy.
University Lecturers Launch Strike as Higher Education Crisis Deepens
September 30, Colombo (LNW): Academic staff across Sri Lanka’s state universities are set to stage a nationwide strike today (30), in protest against what they describe as the government’s persistent neglect of critical issues facing the higher education sector.
The Federation of University Teachers’ Associations (FUTA), which represents lecturers and academics from public universities, announced the industrial action during a press briefing in Colombo.
The Union accuses the current administration of failing to deliver on promises made to address longstanding challenges within the university system, despite having been in office for over a year.
FUTA Secretary, Senior Lecturer Charudaththe Ilangasinghe, voiced deep concern over the deteriorating conditions in public universities, emphasising that the government’s silence on the key issues could be dangerous for the future of public education in Sri Lanka.
Among the core grievances raised by the union are the declining quality of education, underfunding, and a growing exodus of experienced academic staff. Ilangasinghe highlighted the situation at the University of Peradeniya, where more than 200 lecturers have reportedly resigned or left for overseas positions in the past year alone—a figure he described as “deeply troubling.”
Sri Lankan Nationals Held in Bengaluru Over Illegal Entry and Criminal Allegations
September 30, Colombo (LNW): Authorities in Bengaluru have apprehended three Sri Lankan nationals believed to be involved in serious criminal activities, following a targeted operation carried out by the city’s Central Crime Branch (CCB).
The trio, aged 29, 31, and 41, were found residing unlawfully in an apartment complex located in the Devanahalli area, on the outskirts of the city. Initial inquiries suggest the individuals had been living in hiding for several months, evading detection by local authorities.
According to Indian media, the men—originally from Dondra, Ratmalana, and Kotahena—are suspected to have entered India illegally via a maritime route from Jaffna to Rameswaram, Tamil Nadu, sometime in 2024.
After brief stopovers in Chennai and Coimbatore, they eventually made their way to Bengaluru, where they settled without proper identification or immigration documents. None of the individuals possessed valid passports or visas at the time of arrest.
Police investigations have revealed that at least two of the detainees are facing serious charges in Sri Lanka. One is reportedly wanted in connection with a drug trafficking case, while another is under suspicion for involvement in a murder, among other alleged crimes.