Sri Lanka’s apparel exporters have raised concerns that local export trading houses adhering to the United States’ ‘First Sale for Export’ rule may be forced to relocate overseas due to the proposed elimination of the Simplified Value-Added Tax (SVAT). 

The move, they warn, could weaken the country’s competitive edge in the global market.

Under the First Sale for Export Rule, manufacturers sell their goods to a trading house based in Sri Lanka, which then facilitates transactions with the ultimate buyer in the US or another intermediary. 

These middlemen, who play a crucial role in ensuring quality and compliance, operate within Sri Lanka, thereby keeping value addition and margins within the country. However, the planned removal of SVAT could disrupt this arrangement significantly.

Currently, SVAT allows trading houses to operate without the immediate burden of VAT payments, as they do not have to pay the tax upfront and later claim refunds. 

Without this system, trading houses will have to incur VAT costs initially, seek refunds later, and face additional administrative challenges, increasing operational expenses and cash flow issues.

According to Yohan Lawrence, Secretary General of the Joint Apparel Export Forum, Sri Lanka hosts 12 active trading houses, which account for approximately 50% of total apparel exports. 

He warns that, if SVAT is eliminated, these trading houses may shift operations to other countries, leading to significant revenue losses for Sri Lanka.

Apparel exporters argue that they operate on narrow profit margins and any additional cost burden could make them less competitive compared to other global players. 

The removal of SVAT is part of a broader economic reform program under the International Monetary Fund (IMF), which aims to streamline the VAT process and improve efficiency in the export sector. 

However, exporters argue that unless VAT leakages are identified and addressed directly, the new policy may do more harm than good.

Another major concern is that without SVAT, exporters may reduce purchases from local suppliers due to the added tax burden. Domestic purchases would become subject to VAT under the new system, leading to increased costs and delays in recovering tax refunds, discouraging businesses from sourcing locally.

The IMF-backed fiscal reforms have prioritized revenue-based consolidation while continuing to support subsidies in other sectors. For example, the latest budget included a 15% tax on individual service exporters while simultaneously granting fertilizer subsidies to vegetable and rice farmers. 

With import restrictions and taxes in place, rice prices in Sri Lanka remain significantly higher—by 40% to 50%—than in neighboring countries.

Impact of SVAT Removal on Apparel Exports

The elimination of SVAT could have a profound impact on Sri Lanka’s apparel industry, which is a key contributor to the nation’s export revenue. With trading houses potentially relocating to tax-friendly jurisdictions, the country risks losing a significant portion of its export value. 

Moreover, increased operational costs and cash flow challenges could push apparel manufacturers to reconsider their sourcing strategies, potentially shifting their supply chains to international markets rather than supporting domestic suppliers.

 In the long run, this policy change could weaken Sri Lanka’s position as a leading apparel exporter, reducing foreign exchange inflows and employment opportunities in the sector.

Sri Lanka’s total exports in February 2025 reached $1.38 billion, reflecting a 5% year-on-year (YoY) increase, driven largely by the services sector, while merchandise exports saw a slight decline.

Data from the Sri Lanka Export Development Board (EDB) showed that merchandise exports fell by 0.27% YoY to $1.05 billion, whereas services exports surged by 24.37% YoY to $326.14 million. Compared to January 2025, February’s exports marked a 2.58% month-on-month rise.

The decline in merchandise exports was attributed to reduced earnings from rubber-based products, electrical and electronic components, seafood, ornamental fish, and diamonds, gems, and jewelry.

However, overall exports in the first two months of 2025 rose by 7% YoY to over $2.73 billion, with merchandise exports increasing by 4% YoY to over $2.19 billion and services exports surging by 17.2% to $621.14 million. Key service sectors included ICT/BPM, construction, financial services, and transport and logistics.

Sectoral Performance

Apparel and textile exports performed well, recording an 11% YoY increase to $887.52 million between January and February 2025. Boat building exports saw a dramatic 4,600% growth, though contributing only $3.76 million.

Agricultural exports also showed strong performance: tea exports, accounting for 12% of total merchandise exports, grew by 1% to $231.11 million; coconut-based exports rose by 26% to $156.77 million; and spice and concentrate exports increased by 47% to $76.92 million.

On the services front, ICT/BPM exports grew by 24.1% YoY to $255.89 million, while transport and logistics exports increased by 26% YoY to $338.47 million.

Export Targets and Market Performance

Sri Lanka has set an ambitious $19 billion export revenue target for 2025, aiming to grow both merchandise and services exports. Merchandise exports are projected to increase from $12.7 billion in 2024 to $14 billion in 2025, while services exports are expected to rise from $3.5 billion to $4.2 billion. The long-term strategy aims for total export earnings of $36 billion by 2030, with $25 billion from goods and $11 billion from services.

Among Sri Lanka’s top 15 export markets, India, Germany, the Netherlands, and China exhibited positive growth in February and cumulatively for the first two months of 2025. The U.S., Sri Lanka’s largest export destination, accounted for 23% of merchandise exports but saw a 3.63% decline in February 2025 to $240.53 million.

 However, cumulative exports to the U.S. rose by 6.52% YoY to $500.71 million. Exports to the UK dropped 12.3% YoY in February but showed a slight 1.22% YoY growth cumulatively.

Exports to FTA Partners and the EU

Exports to India and Pakistan accounted for 6.5% of total merchandise exports in February 2025, with a 44.08% YoY increase to $88.29 million. Exports to India surged by 49.56%, driven by petroleum oil, animal feed, and pepper, while exports to Pakistan fell by 10.77%. Cumulatively, exports to both countries rose by 43.21% YoY to $176.59 million.

The European Union (EU) accounted for 24% of Sri Lanka’s exports, generating $454.97 million in the first two months of 2025, an 8.27% YoY increase. Germany led EU markets with $110.01 million (up 8.68%), followed by Italy ($95.21 million, down 5.29%), the Netherlands ($70.09 million, up 2.85%), France ($42.33 million, up 8.52%), and Belgium ($38.1 million, up 8.52%).

Overall, Sri Lanka’s export sector demonstrated resilience in early 2025, with strong service sector growth compensating for the slight dip in merchandise export

The Ceylon Chamber of Commerce, Sri Lanka’s premier business chamber, marked its 186th anniversary yesterday, celebrating nearly two centuries of service to the nation’s economic growth and development.

Reflecting on this milestone, Ceylon Chamber Chairman Duminda Hulangamuwa stated:

“For 186 years, The Ceylon Chamber has remained committed to putting ‘Sri Lanka First’ in all its efforts. Whether through policy advocacy, trade facilitation, or fostering market access, we reaffirm our dedication to advancing business interests while driving national growth and prosperity.”

Championing Economic Growth and Global Engagement

Guided by its core pillars—Policy Advocacy, Engagement, and Market Access—The Ceylon Chamber continues to:

• Support economic resilience and post-crisis recovery.
• Attract investment and facilitate trade.
• Strengthen international business ties through high-level delegations and partnerships with global trade bodies.

Looking Ahead

The Chamber remains committed to building stronger businesses, creating sustainable opportunities, and ensuring that Sri Lanka remains competitive in the global market.

Expressing gratitude to its members, stakeholders, and partners, The Ceylon Chamber reaffirmed its dedication to collaborative growth and economic progress as it moves forward into the future.

The Bank of Ceylon (BOC) has made a significant advancement in digital banking with the launch of its latest mobile application, BOC Flex. Designed to offer a seamless, secure, and user-friendly experience, the app empowers customers with greater control over their finances.

 BOC unveiled BOC Flex on March 21 at Colombo’s iconic Lotus Tower, with notable attendees such as Dr. Hans Wijayasuriya, Chief Adviser to the President on Digital Economy, BOC Chairman Kavinda de Zoysa, and General Manager and CEO Russel Fonseka. The bank’s Corporate and Executive Management team also joined the event, highlighting BOC’s commitment to digital transformation.

The app revolutionizes banking by providing 24/7 access to a wide range of services. Customers can self-register, use biometric authentication, and even open a Flex savings account digitally—eliminating the need for branch visits. Additionally, the platform allows users to open standard savings accounts and fixed deposits with automated renewal features, streamlining the banking process.

A standout feature of BOC Flex is its instant loan facility, enabling customers to secure loans against fixed deposits in just a few clicks. The app also facilitates seamless financial transactions, including fund transfers (one-to-one, multiple, and scheduled), as well as bill payments, making everyday banking more convenient.

Y. A. Jayathilaka, BOC’s Deputy General Manager for Products and Banking Development, emphasized the bank’s focus on technological advancements, stating, “BOC Flex is a next-generation mobile app that ensures a secure and convenient banking experience. We are committed to evolving with technology to enhance financial accessibility for our customers.”

Beyond basic banking services, BOC Flex offers a personalized user experience. Customers can customize their dashboard with widgets and themes, enhancing ease of use. Additionally, built-in financial tools such as an expense tracker, payment reminders, and financial memos help users manage their budgets effectively.

Security remains a top priority, with the app incorporating advanced encryption and authentication protocols to safeguard transactions and account data. With these cutting-edge features, BOC aims to provide a seamless transition for existing users while catering to modern banking needs.

BOC Flex will soon be available for download on major app stores, ensuring accessibility for all customers seeking a smarter and more efficient banking experience.

Over 22,450 Government, Semi-Government, and private sector institutions have defaulted on paying a total of Rs. 36 billion to the Employees’ Provident Fund (EPF) accounts of their staff, Labour Deputy Minister Mahinda Jayasinghe announced yesterday.

Speaking at the event marking the assumption of duties by the new Commissioner General of Labour, H.M.D.N.K. Wataliyadda, the Deputy Minister emphasized that the Government will take action against employers failing to fulfill their EPF obligations.

Employer Responsibilities & EPF Contributions

Under the EPF Act, employees must contribute a minimum of 8%, while employers contribute 12% of an employee’s monthly salary. These contributions are then invested in secured investments for employees’ future benefits.

Government Action & Labour Law Reforms

The Labour Department is actively pursuing legal action against defaulting employers. Additionally, efforts are underway to:

• Digitalize the Labour Department’s operations, in collaboration with the Digital Ministry, to enhance productivity and prevent fraud.
• Revamp outdated labour laws, with a focus on:
  • Preventing workplace harassment against women
  • Eradicating child labour
  • Reviewing and ensuring the effective implementation of international labour agreements

Deputy Minister Jayasinghe reaffirmed the Government’s commitment to strengthening labour rights and ensuring compliance with EPF regulations to protect employees’ financial security.

A committee appointed to investigate the use of ministerial official residences for non-official purposes has submitted its report to the Presidential Secretariat.

Minister of Public Administration, Chandana Abeyratne, stated that a decision regarding the future use of these residences will be made after a thorough review of the report.

The five-member committee was assigned to examine whether ministerial residences were being utilized for economic activities beyond their official purpose.

Hon. Bimal Rathnayake, Minister of Transport, Highways, Ports, and Civil Aviation, and Leader of the House of Parliament, has been elected as the Chair of the Sri Lanka-China Parliamentary Friendship Association for the Tenth Parliament.

The election took place on the 21st at a meeting chaired by Hon. Speaker Dr. Jagath Wickramaratne, marking the re-establishment of the Association. Chinese Ambassador to Sri Lanka, HE Qi Zhenhong, attended as the chief guest.

Additionally, Hon. Lakmali Hemachandra, Attorney at Law, was elected as the Secretary of the Association.

Hon. Dr. Wickramaratne highlighted the deep-rooted cultural and political ties between Sri Lanka and China, emphasizing the Association’s role in strengthening cooperation in trade, education, and technology. He encouraged the newly elected officials to actively work towards these objectives.

Ambassador Qi Zhenhong reiterated the importance of the Friendship Association in fostering bilateral relations, particularly during challenging times, and extended his best wishes to the new leadership.

Expressing gratitude for his appointment, Minister Rathnayake acknowledged China’s longstanding support for Sri Lanka and emphasized the value of learning from China’s expertise, particularly in education and trade. He also proposed expanding programs for young MPs to further enhance bilateral ties.

In her vote of thanks, Secretary Lakmali Hemachandra reaffirmed the Association’s commitment to strengthening Sri Lanka-China relations.

The event was attended by the Hon. Leader of the Opposition, Ministers, Deputy Ministers, Members of Parliament, and other dignitaries.

The info-NDRSC Disaster Related Data System, a digital platform for collecting and distributing statistical data on families affected by natural disasters, was officially launched yesterday (24) at the Colombo Disaster Management Center.

The event took place under the patronage of Deputy Minister of Defence, Major General Aruna Jayasekara (Retd).

Developed as part of the National Statistics Development Program, the system allows data entry at the Grama Niladhari Division level, ensuring standardized verification procedures for accuracy and efficiency.

In addition to the database, a quarterly newsletter, info-NDRSC, was introduced to enhance awareness of disaster response and relief services.

The project was funded by Save the Children and received technical support from GIS Solutions (Pvt) Ltd.

As part of the Clean Sri Lanka national program and the government’s broader digitalization efforts, the event saw participation from senior officials of the Disaster Management Division, Department of Census and Statistics, National Building Research Institute, and Department of Meteorology, along with 485 disaster relief officers from across the country.

Showers or thundershowers are expected in several areas of the Western, Sabaragamuwa, Central, Southern, and Northwestern provinces after 2:00 p.m.

Some locations in the Western, Sabaragamuwa, Southern, and Uva provinces may experience heavy rainfall of approximately 100 mm.

Additionally, a few showers are likely in the Eastern Province and Polonnaruwa District.

Misty conditions are anticipated in the morning in parts of the Western, Sabaragamuwa, Central, and Uva provinces, as well as in Galle, Matara, and Kurunegala districts.

The public is advised to take necessary precautions against potential damages caused by temporary strong winds and lightning during thundershowers.