By: Staff Writer

May 28, Colombo (LNW): Sri Lanka’s ambitious electricity sector reform programme has entered a decisive phase, with finance professionals and policymakers acknowledging that restructuring the state-run power sector will require more than legislation alone. The debate intensified during a high-level seminar organised by the Association of Public Finance Accountants of Sri Lanka, where experts examined the controversial restructuring of the Ceylon Electricity Board under the new Electricity Act No. 36 of 2024 and its 2025 amendment.

The seminar, attended by more than 250 participants including chartered accountants and senior public finance officials, highlighted growing concern over the operational and financial realities of reforming one of Sri Lanka’s most critical state institutions. While officials described the legal framework as a major step toward modernising the country’s energy sector, experts also warned that the transition would be complicated, politically sensitive, and institutionally demanding.

Opening the discussion, President of the Association Tishan Subasinghe stressed that accounting and finance professionals cannot remain passive observers while sweeping economic reforms reshape the country’s public sector. He argued that professionals in governance and financial management must actively contribute to national restructuring efforts, particularly when state institutions are under pressure to improve efficiency and transparency.

The keynote address by Prof. M. Thilakasiri provided a detailed explanation of the rationale behind the reforms. According to him, the 2024 Electricity Act was designed as a broad reform blueprint intended to reshape the country’s energy sector into a financially sustainable and operationally efficient system. However, as authorities moved from policy design to implementation, several weaknesses in the framework became increasingly visible.

Prof. Thilakasiri explained that the subsequent 2025 amendment was introduced to correct structural and institutional flaws discovered during the practical planning stages. Among the key concerns were uncertainties surrounding governance structures, ownership arrangements, staff transfers, and operational responsibilities within the proposed restructuring framework.

 A central feature of the reforms is the proposed “unbundling” of the CEB a process intended to separate key functions such as generation, transmission, and distribution into distinct operational units. Supporters argue that this would improve accountability, financial visibility, and managerial efficiency. Critics, however, fear that fragmentation could create new administrative challenges and expose the sector to political and commercial risks.

The discussion became particularly animated during the seminar’s interactive question-and-answer session, where participants raised concerns about implementation costs, institutional resistance, workforce implications, and long-term governance safeguards. Many attendees questioned whether legislative reform alone could resolve decades of inefficiencies and financial instability within the energy sector.

Responding to these concerns, Prof. Thilakasiri admitted that the restructuring exercise should not be viewed as a “magic solution” to every longstanding issue facing Sri Lanka’s electricity industry. Instead, he described the reforms as a strategic starting point requiring continuous adjustments, gradual improvements, and a long-term commitment to institutional change.

He further noted that the success of the reforms would ultimately depend on disciplined execution, regulatory consistency, and the government’s ability to navigate resistance from multiple stakeholders while maintaining public confidence in the country’s energy future.

By: Staff Writer

May 28, Colombo (LNW): Sri Lanka’s small and medium enterprise sector is warning that the country may once again be heading toward a balance-of-payments crisis unless urgent steps are taken to curb non-essential imports and stabilise the rapidly weakening rupee.

The Ceylon United Business Alliance (CUBA), representing a broad network of SMEs, has appealed to President and Finance Minister Anura Kumara Dissanayake to immediately impose a temporary ban on non-essential imports, arguing that global instability linked to the escalating Middle East conflict is placing immense pressure on Sri Lanka’s fragile foreign exchange reserves.

In a strongly worded appeal, the alliance warned that the country is already facing a critical shortage of US dollars, with rising import costs threatening to destabilise domestic industries that are still recovering from the economic collapse of 2022.

Business groups say the depreciation of the rupee has significantly increased the cost of imported consumer goods, raw materials, shipping, and energy, leaving many SMEs struggling to remain competitive. Industries dependent on imported finished goods are particularly vulnerable, as higher exchange rates translate directly into rising retail prices and shrinking consumer demand.

CUBA argues that restricting imports of products that can be manufactured locally would provide immediate relief to the economy while also strengthening domestic production capacity. The organisation identified sectors such as apparel, footwear, tiles, processed food, furniture, and plastic products as industries capable of meeting a substantial share of local demand if given policy protection.

According to the alliance, limiting apparel imports alone could help the country retain between $75 million and $150 million each month in valuable foreign exchange reserves. The group insists that such measures are not intended to isolate Sri Lanka from global trade, but rather to prioritise scarce dollar resources during a period of exceptional economic vulnerability.

SME representatives say local manufacturers are increasingly unable to compete with imported goods due to currency fluctuations and rising financing costs. Many small businesses that survived the previous crisis are now burdened by higher electricity tariffs, transport expenses, and borrowing rates, while consumers continue to reduce discretionary spending amid inflationary pressures.

Economists note that a weaker rupee can benefit exporters by making Sri Lankan goods more competitive overseas. However, for domestic SMEs reliant on imported machinery, packaging materials, chemicals, and industrial inputs, the depreciation has become a double-edged sword. Rising production costs are eroding profit margins and forcing some businesses to scale down operations or reduce employment.

CUBA stressed that any import restrictions should carefully exclude essential goods and industrial inputs required for production. The alliance specifically called for uninterrupted access to raw materials, fabric, fuel, medicine, machinery, steel, rice, and tourism-related supplies to avoid further disruption to economic activity.

The organisation warned that failure to act swiftly could result in factory closures, job losses, and renewed pressure on the country’s foreign reserves. It urged the Government to treat the situation as an immediate national priority, arguing that decisive intervention now could prevent Sri Lanka from slipping back into another full-scale economic crisis.

By: Staff Writer

May 28, Colombo (LNW): Sri Lanka’s fragile economic recovery is facing renewed turbulence amid growing allegations that Sri Lanka Customs is artificially inflating the value of the US dollar for import-related transactions, triggering higher costs for businesses and consumers already struggling under severe economic pressure.

According to an official Customs circular, the department continued to apply an exchange rate of Rs. 351.17 per US dollar for import valuations and duty calculations between 25 and 29 May, despite the Sri Lankan rupee showing signs of recovery in the interbank foreign exchange market. Financial analysts and trade sector representatives argue that the Customs valuation rate significantly exceeded prevailing market rates quoted by commercial banks during the same period.

The controversial move has prompted criticism from legal and economic observers who warn that the arbitrary maintenance of an elevated dollar rate could undermine confidence in Sri Lanka’s stabilising currency market. The Free Lawyers Organisation publicly questioned why Customs persisted in using a higher exchange benchmark even after the Central Bank of Sri Lanka intervened to restore liquidity and calm volatility in the forex market.

The Central Bank had earlier announced that emergency monetary measures introduced last week had successfully reduced panic-driven distortions and stabilised interbank currency trading. However, importers claim the Customs valuation mechanism appears disconnected from actual market conditions, effectively imposing an invisible financial penalty on goods entering the country.

Industry representatives say the consequences are immediate and severe. Importers are compelled to pay duties and taxes calculated on an inflated dollar rate, sharply increasing the landed cost of essential goods, industrial raw materials, pharmaceuticals, food items, and consumer products. Many businesses fear these additional costs will inevitably be transferred to consumers through higher retail prices, worsening inflationary pressures across the economy.

President’s Counsel Maithri Gunaratne and Free Lawyers Organisation Chief Executive Officer Rajith Keerthi Tennakoon have called on authorities to urgently align Customs exchange rates with prevailing market rates. They argue that maintaining an unrealistic valuation system creates market distortions, unfairly burdens importers, and weakens public trust in economic governance.

Economists note that Customs exchange rates are traditionally used as administrative benchmarks for taxation and import valuation purposes and do not always mirror daily fluctuations in the interbank market. However, critics argue that the unusually wide gap between the official Customs rate and the actual trading rate raises concerns about transparency and policy consistency during a period of economic vulnerability.

Several import sector associations have warned that the discrepancy could discourage trade activity and create uncertainty for businesses already grappling with tight credit conditions, rising shipping costs, and reduced consumer demand. Small and medium-scale importers are expected to be hit hardest, with many lacking the financial flexibility to absorb sudden increases in import duties.

The controversy has also revived broader concerns regarding the balance between Government revenue collection and economic recovery. While Customs remains one of the State’s largest revenue-generating institutions, analysts caution that excessive taxation through inflated exchange valuations could slow down imports, disrupt supply chains, and intensify the cost-of-living crisis affecting ordinary Sri Lankans.

By: Staff Writer

May 28, Colombo (LNW): Sri Lanka has secured another major financial lifeline from the International Monetary Fund after the IMF Executive Board approved a fresh disbursement of US$695 million under the country’s Extended Fund Facility programme, even as authorities missed critical reform targets.

The latest approval followed the successful completion of the combined Fifth and Sixth Reviews of the IMF programme, bringing total IMF support extended to Sri Lanka to nearly US$2.4 billion.

While commending the government for maintaining “generally strong” reform implementation, the IMF highlighted concerns over Sri Lanka’s failure to prevent new external payment arrears and its inability to fully avoid additional import restrictions.

The IMF nevertheless recognised progress in several key areas, particularly the restoration of cost-reflective pricing for fuel and electricity reforms considered essential to stabilising state finances after the country’s unprecedented economic collapse.

In a significant policy concession, the IMF granted Sri Lanka temporary fiscal space in 2026 to finance relief and reconstruction activities linked to Cyclone Ditwah, which caused widespread damage and economic disruption across several regions.

However, the Washington-based lender stressed that fiscal discipline must resume from 2027 onward, requiring the government to maintain a primary budget surplus of 2.3 percent of GDP and comply with tight expenditure ceilings.

The IMF also directed Sri Lanka to prepare a medium-term revenue strategy focused on broadening the tax base, improving tax administration, and increasing state revenue collection.

Another key recommendation involved greater exchange rate flexibility, with the IMF urging the Central Bank to strengthen buffers against external shocks amid growing global uncertainty.

According to the IMF, mounting geopolitical tensions in the Middle East, coupled with the lingering economic effects of Cyclone Ditwah, continue to pose serious downside risks to Sri Lanka’s recovery by exerting pressure on energy prices and foreign exchange inflows.

Sri Lanka’s economy has shown signs of gradual stabilisation since entering the IMF programme, with inflation easing and tourism earnings recovering. However, analysts warn that maintaining reform momentum and restoring public confidence remain crucial for achieving long-term economic stability.

May 28, Colombo (LNW): Sri Lanka has secured a further financial lifeline from the International Monetary Fund after the organisation approved the latest reviews of the country’s ongoing economic reform programme, unlocking immediate access to approximately US$695 million in funding.

The IMF Executive Board announced the completion of the combined fifth and sixth assessments under Sri Lanka’s 48-month Extended Fund Facility arrangement, allowing the country to draw Special Drawing Rights worth SDR508 million. With the latest disbursement, total funding received by Sri Lanka under the programme has now risen to around US$2.4 billion.

The Extended Fund Facility, initially approved in March 2023, was designed to support Sri Lanka’s recovery from its worst economic crisis in decades. The programme focuses on restoring fiscal discipline, stabilising inflation, rebuilding foreign reserves, strengthening governance and introducing long-term structural reforms aimed at reviving investor confidence and economic growth.

In remarks issued following the board meeting, IMF Deputy Managing Director and Acting Chair Kenji Okamura said Sri Lanka had continued to implement reforms effectively despite facing major external challenges. He noted that recent economic gains had helped cushion the impact of Cyclone Ditwah as well as instability arising from the conflict in the Middle East.

However, the IMF cautioned that the global situation has created fresh risks for the island nation’s recovery. Economic growth for 2026 is now projected to moderate to around three per cent, with rising oil prices expected to place pressure on inflation and external accounts. Tourism earnings, one of Sri Lanka’s key sources of foreign income, could also face setbacks amid continuing international uncertainty.

The IMF acknowledged the government’s decision to introduce temporary relief measures and increase spending for disaster recovery efforts following the cyclone, describing the short-term fiscal easing as appropriate under the circumstances. At the same time, authorities were urged to return to stricter fiscal targets from 2027 onwards to maintain debt sustainability.

The statement further noted that while overall programme performance remains positive, several critical reforms still require acceleration. These include improvements to public financial management, reforms within the electricity sector and stronger strategies for revenue collection through a more efficient and growth-oriented tax system.

The IMF also highlighted that although Sri Lanka’s debt restructuring process is nearing completion, risks surrounding long-term debt sustainability remain elevated. It stressed the importance of maintaining price stability through careful monetary policy while allowing greater flexibility in the exchange rate to strengthen foreign reserves and improve economic resilience.

According to the IMF, sustained structural reforms, alongside renewed investment in public infrastructure, will be essential to improving the country’s business environment and unlocking stronger long-term growth prospects.