By: Isuru Parakrama

April 03, Colombo (LNW): Sri Lanka is set to face significant economic challenges following the United States’ latest round of tariffs, with President Donald Trump announcing steep duties on imports, including a 44 per cent tariff on Sri Lankan goods.

The move, unveiled in a statement from the White House Rose Garden, introduces a baseline 10 per cent tariff on all imports to the US, with certain nations facing considerably higher levies.

Sri Lanka now finds itself amongst the hardest-hit economies, ranking alongside Myanmar and Vietnam, which also face 44 per cent and 46 per cent tariffs, respectively.

Cambodia tops the list with a staggering 49 per cent duty, whilst China is subjected to a 34 per cent tariff.

These measures, according to Trump, are aimed at addressing what he perceives as unfair trade practices that disadvantage American industries and workers.

The announcement has sent shockwaves through global markets, with US stock futures plummeting amid concerns over inflation and corporate earnings. The move also signals a dramatic shift away from decades of global trade liberalisation, raising fears of retaliatory actions from affected nations.

Sri Lanka, which exports approximately 25 per cent of its goods to the US, is particularly vulnerable, as industries such as apparel manufacturing, tea exports, and rubber production could see a significant downturn in revenue.

Speaking on the tariffs, Trump described the measure as a “declaration of economic independence,” insisting that the move would revitalise domestic manufacturing and create jobs for American workers.

However, economic experts caution that the new tariffs could disrupt global supply chains, increase costs for US consumers, and potentially push the world economy closer to recession.

Sri Lanka’s government has yet to release an official response, but industry leaders have voiced concerns about the potential impact on exports.

With garments and textiles forming a large share of Sri Lanka’s exports to the US, manufacturers fear that higher tariffs will reduce competitiveness, leading to order cancellations, factory closures, and job losses.

Sri Lanka is yet to respond to the tariff move, but the economic fallout from these tariffs could be substantial. Export-driven businesses may be forced to explore alternative markets or negotiate for exemptions, whilst policymakers face the challenge of mitigating the financial strain on key industries.

By: Staff Writer

April 02, Colombo (LNW):In today’s world, where technology fuels economic advancement, embracing the digital economy is imperative rather than optional. Countries worldwide are leveraging digital innovations to drive growth, improve governance, and generate employment. Sri Lanka, with its strategic location and skilled workforce, is poised to capitalize on this shift. A significant step in this direction is the nation’s goal of establishing a $15 billion digital economy, supported by the creation of a dedicated Ministry of Digital Economy to spearhead the transformation.

The Digital Economy and Its Potential

The digital economy comprises various technology-driven activities, including e-commerce, financial technology (fintech), artificial intelligence (AI), and cloud computing. While it has become a major contributor to GDP in developed countries, for developing nations like Sri Lanka, it presents a transformative opportunity. As the country navigates economic recovery, a thriving digital sector could unlock significant growth, attract investment, and empower its citizens.

Strategic Approach to Digital Transformation

Achieving the ambitious $15 billion digital economy target necessitates a strategic and focused approach. Establishing the Ministry of Digital Economy is crucial for streamlining policies across different sectors and formulating a cohesive strategy. This ministry will enhance coordination among government agencies, private enterprises, and global organizations to ensure impactful digital initiatives.

To facilitate this transition, the Sri Lankan government has committed $10 million (approximately Rs. 3 billion) towards digital transformation efforts in 2025. Key initiatives include implementing a unique digital identification system and establishing new regulatory frameworks for digital services, overseen by a centralized Digital Economic Authority.

A significant focus is the transition towards a cashless economy, emphasizing investments in emerging sectors such as AI, robotics, and fintech. However, balancing innovation with regulatory oversight remains critical in managing risks within the fast-evolving digital landscape.

Fintech’s Expansion and Regulatory Challenges

The rise of fintech has reshaped financial services, offering greater speed, efficiency, and accessibility—qualities particularly valued by younger generations like Gen Z. Fintech companies operate in diverse areas, with some expanding access to traditional financial services, while others introduce entirely new tech-based financial products.

In Sri Lanka, however, certain fintech firms that do not offer traditional banking services operate outside the regulatory purview of the Central Bank of Sri Lanka (CBSL). This lack of oversight creates risks such as financial instability, cybersecurity threats, and market volatility. Additionally, unregulated fintech activities can challenge conventional banking institutions that function under strict CBSL regulations.

Foreign exchange transactions via unregulated fintech platforms pose further concerns, potentially enabling untraceable cross-border financial flows. Ex-Minister Patali Champika Ranawaka has warned about underground financial networks, such as Undiyal and Hawala, which could bypass tax regulations, making enforcement difficult for authorities like the Inland Revenue Department.

The Future of Cryptocurrency in Sri Lanka

Cryptocurrency is gaining global traction, and Sri Lanka is witnessing increasing interest in digital currencies like Bitcoin. There have been proposals to establish a crypto agency in Colombo’s port city, but without a clear regulatory framework, the sector could pose substantial financial risks, similar to past issues in the casino industry.

Many Sri Lankans are already engaged in cryptocurrency trading and mining, generating income in the process. However, Bitcoin mining is an energy-intensive activity, and Sri Lanka currently lacks the necessary infrastructure to support large-scale operations. Even developed countries like the U.S. are planning to expand production to meet future industry demands.

Moving forward, Sri Lanka must develop a comprehensive strategy for cryptocurrency regulation. This should address key concerns, including energy consumption, infrastructure readiness, and financial security. Simply acknowledging the rise of digital currencies is insufficient—establishing well-defined policies and regulations is essential to ensure that technological advancements contribute positively to the country’s economic transformation

By: Staff Writer

April 02, Colombo (LNW):The government has introduced several indirect tax measures aimed at boosting revenue and ensuring economic stability. While these taxes do not directly impact personal income, they are expected to raise the cost of goods and services, ultimately affecting the public.

Among the most notable changes in the 2025 budget is the imposition of an 18% Value-Added Tax (VAT) on digital services provided by non-resident companies to Sri Lankan consumers, effective from April 1, 2025. Additionally, the Simplified VAT (SVAT) scheme will be discontinued, and a VAT refund system will be implemented starting October 1, 2025. The contribution rate to the VAT Refund Fund will also rise from 6% to 10% on the same date. These key measures were highlighted in KPMG’s budget analysis.

Critics argue that the tax policies disproportionately impact small businesses and individuals while being relatively lenient on large corporations. Despite maintaining a 30% levy on major businesses, the government refrained from increasing it further. Meanwhile, smaller entities, including individual companies and small partnerships, saw their tax rates climb from 10% to 15%. Taxes on trusts and individual funds have tripled to 30%, while non-profit organizations, previously taxed at 10%, will also now face a 30% tax.

“The taxation burden primarily falls on ordinary citizens and small businesses, whereas large enterprises remain largely unaffected,” critics have voiced.

Economic analysts caution that these regulatory changes will raise consumer costs, as businesses are likely to pass on additional expenses to customers. The newly introduced 18% VAT on digital services will increase the cost of online platforms, impacting a broad spectrum of users. While the government aims to strengthen fiscal stability, experts emphasize the necessity of support programs to shield low- and middle-income groups from the financial strain.

K.M. Mahinda Siriwardana, Secretary to the Ministry of Finance, acknowledged that a significant portion of 2025’s revenue growth will stem from motor vehicle import taxes. He confirmed that the excise tax framework for standard passenger vehicles remains largely unchanged, except for an annual indexation adjustment. However, a 30% customs duty has been imposed to regulate demand following a five-year import ban.

Another significant policy shift is the increase in individual capital gains tax (CGT) to 15%. While corporate CGT remains at 30%, the higher tax rate for individuals may prompt capital flight as investors seek more favorable tax environments.

During a recent Continuing Professional Development (CPD) seminar on the budget’s implications, Athula Ranaweera, Managing Partner of Ranaweera Associates, raised concerns about taxation policies. He highlighted that, starting April 1, 2025, income earned from foreign clients—previously tax-exempt when received in foreign currency—will now be taxed at 15%.

While this aligns with the government’s IMF-supported strategy to expand the tax base, he warned that enforcing compliance could be challenging.

By: Staff Writer

April 02, Colombo (LNW):Sri Lanka is advancing in the global manufacturing value chain by adding value to electrical equipment and components imported from China. The country aims to enhance its exports, particularly in the electrical sector, by adding 25% value locally and re-exporting these products. The Government is focusing on trade and investment reforms, promoting innovation, and reducing service link costs to integrate domestic companies into global production networks.

Chaturanga Abeysinghe, Sri Lanka’s Minister of Industry and Business Development, announced that the country is working to boost its electrical equipment exports to US$ 1 billion, a significant increase from the current US$ 420 million. The government is committed to promoting private sector entrepreneurship to achieve this goal. Abeysinghe made these remarks during the launch of a partnership between Sri Lanka’s ME Group and China’s Dvolt Electric Limited. This collaboration is expected to expand the global sales of electrical equipment and accessories, thus increasing foreign exchange earnings.

The ME Group, a prominent electrical equipment manufacturer in Sri Lanka, has been in operation since 1995. It is now working with Dvolt Electric Limited, a leading Chinese company ranked among the top 100 in the electrical equipment industry. This partnership involves the import of 180 products from China, which will be locally processed and value-added before being re-exported to markets like the United States and European Union nations.

The ME Group’s extensive network of affiliated companies, including Micro Electric International Pvt Ltd, Micro Enterprise and Electrical Pvt Ltd, Divolca Electrical India Pvt Ltd, and Royal Organic Export Pvt Ltd, strengthens the company’s position in the industry. Dhammika Samaraweera, the founder and chairman of the ME Group, along with Vice-chairperson Kumari Samaraweera, has been instrumental in advancing the local electrical equipment manufacturing sector.

The collaboration between The ME Group and Dvolt Electric Limited aligns with Sri Lanka’s broader strategy to increase its export capacity and global competitiveness in the electrical equipment industry. The success of this partnership could be a significant step toward achieving the goal of US$ 1 billion in exports.