The Sri Lankan government and India have reached an agreement to establish two solar power plants in Sampur, Trincomalee, with capacities of 50 MW (stage 1) and 70 MW (stage 2). The project will be developed as a joint venture between the Ceylon Electricity Board (CEB) and India’s National Thermal Power Corporation (NTPC) under a construction, ownership, and operation model.

The 50 MW solar power project will be implemented by Trincomalee Power Company Ltd, a partnership between CEB and NTPC, originally set up for the now-shelved coal power project in Sampur.

The Cabinet of Ministers has approved the proposal presented by the Minister of Power and Energy to proceed with the implementation of the project.

President Anura Kumara Dissanayake stated in Parliament that investigations have revealed the infiltration of underworld activities within official institutions responsible for public security. He assured that decisive measures would be taken to eliminate such influences, though the process would require time.

The President made these remarks during the inaugural meeting of the Ministerial Consultative Committee on Defence of the Tenth Parliament, which he chaired.

Discussions included the security of court complexes, with Justice Minister Harshana Nanayakkara proposing enhanced security measures, including modern technology to screen all individuals entering court premises.

MPs raised concerns about military-occupied lands in the Northern and Eastern provinces. In response, the Defence Secretary assured that a nationwide reassessment would be conducted before making decisions on their release.

Regarding military-run businesses, including hotels, the President stated that a study would be conducted to determine how these businesses could be redirected for economic benefits, particularly in the tourism sector.

Concerns over ethnic and religious tensions in the Northern Province were also addressed. The President emphasized the need to eliminate extremism from politics and stressed that issues should be resolved based on the genuine needs of local communities, warning against political exploitation of such matters.

Additionally, the establishment of a National Disaster Management Committee was proposed, and the President instructed officials to expedite the process.

Among those present were Deputy Speaker Dr. Rizvie Salih, Deputy Defence Minister Major General (Retd.) Aruna Jayasekera, ministers, MPs, Defence Secretary Air Vice Marshal Sampath Thuyacontha (Retd.), heads of the tri-forces, and other officials.

Justice Minister Harshana Nanayakkara announced that armed security personnel will be deployed inside court premises under special circumstances following the recent shooting at the Hulftsdorp Court Complex.

Responding to a question by SLPP Kalutara District MP Rohitha Abeygunawardena, the Minister acknowledged that existing regulations prohibit armed guards inside courtrooms. However, he stressed that the government is implementing measures to improve security, especially when high-risk individuals are brought before the courts. Discussions with the Judicial Services Commission, Police, and Prisons Department will finalize these security protocols.

Additionally, Nanayakkara revealed plans to amend the Code of Criminal Procedure to allow special category prisoners to testify via video conferencing from within prisons. This amendment has been submitted to the Cabinet for approval.

“This technology will improve access to justice and reduce the need for prisoner transport,” he said, adding that it will also enable testimony from individuals in foreign countries.

The Minister further emphasized that ensuring the safety of prison officers remains a top priority, given the threats posed by organized crime.

Fitch Ratings stated that Sri Lanka’s latest budget reflects the government’s commitment to increasing fiscal revenues as a share of GDP, a move that could help address long-standing weaknesses in the country’s credit profile.

However, the agency warned that significant risks remain, and a slowdown in fiscal consolidation could impact medium-term debt reduction prospects.

The budget, presented on February 17, is the first under President Anura Kumara Dissanayake and outlines the administration’s fiscal and economic reform agenda. Fitch noted that the budget aligns with its expectations from December 2024, when Sri Lanka’s credit rating was upgraded to ‘CCC+’ from ‘RD’ (Restricted Default).

Sri Lanka’s goal of raising revenue to 15.1% of GDP in 2025, up from 11.4% in 2023, surpasses Fitch’s earlier projection that this level would be reached by 2026. Key revenue increases are expected from taxes on external trade (36.5%) and income taxes (13.1%). However, Fitch highlighted that the success of these targets depends on the smooth liberalization of import restrictions, particularly for vehicles.

While the government aims for a primary budget surplus of 2.3% of GDP in 2025, interest payments are projected at 8.9% of GDP—higher than anticipated under Sri Lanka’s $3 billion Extended Fund Facility (EFF) with the IMF.

Fitch does not expect deviations from the EFF projections to lead to a suspension of IMF disbursements. However, it cautioned that slower fiscal consolidation, combined with optimistic growth projections of 5%, could limit debt reduction progress and leave Sri Lanka vulnerable to economic shocks.

The Batticaloa-Colombo train, ‘Meenagaya,’ collided with a herd of elephants at Gal Oya, resulting in the tragic death of five elephants, Sri Lanka Railways confirmed.

The impact caused the train to derail, obstructing services on the line. Authorities are working to restore operations.

As global trade dynamics shift, Sri Lanka remains vigilant about potential economic consequences stemming from the second-term policies of U.S. President Donald Trump. With Washington signaling a move toward stricter trade reciprocity, emerging markets, including Sri Lanka, are assessing both risks and opportunities. 

While some Sri Lankan exporters see potential benefits, concerns linger over possible disruptions in key industries such as apparel and manufacturing. The government and financial institutions are closely monitoring developments to adapt to potential changes in trade patterns and commodity prices.

The Central Bank of Sri Lanka is actively tracking major policy shifts in the U.S., particularly the possibility of increased tariffs, but does not anticipate any severe economic setbacks, a senior official stated.

President Trump has announced plans to impose reciprocal tariffs on countries that charge higher duties on U.S. imports, raising fears of an escalating global trade war and the potential for rising inflation in the U.S. 

In response, the European Commission has warned that it would take immediate and firm action against such tariff increases, labeling them as unjustified and counterproductive, according to international reports.

S. Jegajeevan, Director of the Central Bank’s Economic Research Department, told reporters on Friday (14) that Sri Lanka is closely observing these developments. “There are both positives and negatives to consider. Some of our major exporters, particularly in the apparel sector, are optimistic about potential outcomes,” she noted. However, she emphasized that it is still too early to make a definitive assessment of the impact on Sri Lanka’s economy.

Jegajeevan pointed to two main channels through which these policies could affect Sri Lanka. Firstly, external demand for Sri Lankan exports may fluctuate, though a major downside impact is not expected. Secondly, changes in global commodity prices—especially oil—could play a role. She suggested that an increase in U.S. oil production might help stabilize or reduce global oil prices in the medium term, offering a potential economic benefit to Sri Lanka.

Potential Direct Impacts on Sri Lanka

Another key concern is the effect of U.S. trade policies on inflation. If tariff hikes lead to persistent inflation in the U.S., the Federal Reserve could slow down its policy normalization process, which in turn could have direct economic implications for Sri Lanka.

If President Trump enforces a reciprocal trade policy, Sri Lanka’s export sector—particularly its apparel and rubber industries—could face serious consequences. The U.S. is Sri Lanka’s largest export market, accounting for around 25% of total exports. 

Should tariffs make Sri Lankan products more expensive and less competitive, it could reduce demand, impact manufacturers, and lead to potential job losses, particularly in the garment industry, which makes up nearly 40% of Sri Lanka’s total exports.

On the import side, Sri Lanka sources several essential goods from the U.S., including machinery, medical equipment, and agricultural products. If Sri Lanka retaliates with higher tariffs on American imports, local businesses and consumers could see rising costs, worsening existing inflationary pressures. Given the country’s ongoing foreign exchange crisis, any additional cost burdens on essential imports could hinder economic recovery efforts and weaken industrial competitiveness.

Shifting Economic Alliances

With potential disruptions in U.S.-Sri Lanka trade relations, analysts predict that Sri Lanka may need to strengthen economic ties with China and India to offset losses from the American market. In the long term, a shift in trade alignment could push Sri Lanka closer to China, altering its foreign policy stance and economic dependencies.

As global trade policies evolve, Sri Lanka must remain adaptable to safeguard its economic stability. While uncertainties remain, proactive strategies will be essential to mitigate potential risks and capitalize on new opportunities in the shifting geopolitical landscape.