By: Staff Writer

April 01, Colombo (LNW): Sri Lanka is expediting the establishment of a Casino Regulatory Authority aimed at addressing key issues like online gambling, tax evasion, and money laundering. A senior official from the Finance Ministry highlighted that the regulation would provide clearer operational guidelines and improve transparency in revenue collection.

The proposed regulatory body is set to oversee the licensing process, monitor financial transactions, and enforce consumer protection measures aligned with international standards. The authority’s key objective is to promote responsible gambling practices and curb illegal activities such as money laundering and underage gambling. The regulation will introduce stricter monitoring and compliance measures to ensure the industry operates within legal frameworks.

The growth of Sri Lanka’s gambling sector has been rapid, with the market projected to reach US $410.04 million by 2026, up from $293.93 million in 2020. This represents a compound annual growth rate of 5.24%. By 2024, the market was expected to reach around $376 million, with projections for a growth of $396 million by 2025. This expansion is driven by political stability, enhanced infrastructure, rising disposable incomes, and an increasing interest in online gaming.

Despite this growth, the absence of a dedicated regulatory body has made it difficult to properly regulate online casinos and ensure proper taxation. Recently, the Committee for Public Finance (COPF), headed by MP Dr. Harasha De Silva, raised concerns over the Inland Revenue Department’s (IRD) inability to regulate online gambling platforms, with initial claims denying their existence in Sri Lanka. However, investigations later confirmed the operation of these platforms, particularly those dealing with cryptocurrencies.

Another significant concern has been the rise of offshore gambling networks. As regulations tighten in other regions, many offshore gambling operators have shifted their operations to Sri Lanka. These operators, who often run call centers and use agents, have been targeting Indian gamblers. Popular international platforms such as 888casino, 22Bet, and Spin Casino have gained traction, particularly among Sri Lanka’s youth. Joint ventures between foreign and local companies are also expected to further boost market growth.

In response to these challenges, Sri Lanka has implemented significant tax reforms in its 2025 budget, aiming to close regulatory gaps. Key provisions include an 18% tax on casino gross revenues and an increase in entry fees from $50 to $100 per person. These measures are expected to generate additional tax revenue from the gaming sector.

Further regulations to strengthen oversight include stringent compliance policies introduced in 2023 to monitor financial transactions and reduce money laundering risks. Gambling operators also face higher taxes, leading to increased operating costs. While online gambling remains legally ambiguous, the government is considering formal regulations for this segment.

Looking ahead, as Sri Lanka’s economy stabilizes, the gambling industry is poised to become a significant contributor to national revenues. In the coming years, the sector can expect:

Increased casino licensing due to a more regulated environment that could attract foreign operators.

Potential legalization and regulation of online gambling.

Enhanced consumer protections through new laws promoting responsible gambling.

With the establishment of an independent regulatory body, Sri Lanka aims to address criminal gambling activity while maximizing the economic benefits of the gambling industry. The evolving policies will foster a safer, more regulated gambling environment, balancing economic growth with social responsibility.

By: Staff Writer

April 01, Colombo (LNW): The Telecommunications Regulatory Commission of Sri Lanka (TRCSL) has been receiving increasing public requests to introduce Number Portability (NP) services. In response, the government has announced concrete steps to implement this long-awaited feature after facing regulatory, financial, and industry-related hurdles for over 17 years.

According to a statement from a recent Ministerial Consultative Committee on Digital Economic Affairs meeting, the government aims to introduce NP services by June 2025. The meeting, chaired by President Anura Kumara Dissanayake, included discussions on allowing mobile phone users to retain their numbers when switching service providers. Officials confirmed that the service would be operational from mid-next year.

The TRCSL first engaged telecom operators to develop a suitable implementation plan. A Public Consultation Paper was published in 2021 to gather stakeholder feedback, followed by collaborative efforts between TRCSL and service providers to determine the best technical model. To facilitate operations, Lanka Number Portability Services (Guarantee) Limited (LNPS) was established with the participation of all mobile and fixed-line operators. TRCSL granted LNPS the necessary license to operate NP services, while the Attorney General’s Department approved the accompanying regulations and guidelines.

Following regulatory approvals, LNPS initiated a procurement process to identify a suitable service provider for the necessary technical infrastructure. By January 2025, the financial evaluation of bids was completed, setting the stage for selecting a supplier and installing the system, with service commencement expected shortly after.

The delay in implementing NP has been a persistent concern. Reports indicate that TRCSL initially secured a $472,000 grant from the World Bank’s Institutional Development Fund (IDF) in 2010 to develop regulatory and implementation frameworks. However, efforts to launch the service faced resistance from private telecom providers, who were reluctant to invest in the infrastructure required for seamless call rerouting.

In 2011, the TRCSL decided against implementing Mobile Number Portability (MNP), citing high costs. Then-Director General Anusha Palpita estimated a $96 million investment would be required, arguing that Sri Lanka’s mobile market was too small to justify the expense. He also warned that the cost burden could be passed on to consumers and suggested that improving overall service quality would be a better alternative.

Despite these past challenges, progress resumed when LNPS, following legal approval, initiated the procurement process. In May 2023, TRCSL invited tenders for installing and commissioning NP services. The then-State Minister of Technology, Kanaka Herath, had promised MNP would be introduced within a year. However, implementation was later postponed to late 2024, with the latest target now set for mid-2025.

Sri Lanka remains one of the last countries in South Asia without number portability. Pakistan, which served as a model for implementation, introduced MNP as early as 2007. With recent developments, Sri Lanka is finally on track to offer this service, aligning itself with global telecom standards and providing greater flexibility for mobile users.

By: Staff Writer

April 01, Colombo (LNW): The Phase II expansion of Bandaranaike International Airport (BIA) has come under scrutiny due to recent allegations of irregularities in the tender process. Questions have arisen about the fairness and transparency of Sri Lanka’s public procurement system after an unexpected extension was granted for bid submissions, reportedly benefiting a single bidder. This decision has sparked widespread criticism, raising doubts about the integrity of the tendering process.

The BIA expansion is a crucial project aimed at enhancing Sri Lanka’s aviation infrastructure. With the Japan International Cooperation Agency (JICA) investing Rs. 170 billion, the project is set to increase the airport’s annual passenger capacity to 16 million, addressing growing air traffic congestion. Initially launched in 2020 with an estimated cost of Rs. 145 billion, progress was hindered by Sri Lanka’s 2022 economic crisis, leaving only six percent of Phase II incomplete.

As per the original plan, the tender process was to follow the Japanese Official Development Assistance (ODA) guidelines, inviting international bidders. The deadline for bid submission was initially set for March 18, 2025. However, a last-minute extension was granted upon the request of a single bidder, prompting protests from leading construction firms. Critics argue that this decision disrupts fair competition and compromises the procurement system’s credibility.

Several key concerns have been raised regarding this controversial extension:

Unfair Advantage – The deadline shift benefits a particular bidder, placing others at a disadvantage. Many companies had already allocated resources to meet the original timeline, only to be undermined by this sudden change.

Impact on Foreign Investment – Such discrepancies in the tendering process could tarnish Sri Lanka’s reputation among international investors. A lack of transparency may deter future foreign participation in large-scale infrastructure projects.

Economic and Corruption Risks – Manipulating bid processes may lead to inflated costs and compromised quality. Favoritism in awarding contracts has historically resulted in project delays, cost overruns, and undue financial strain on taxpayers.

Damage to National Interests – A lack of transparency in national projects erodes public trust in governance. This could lead to economic and political instability, affecting Sri Lanka’s global standing.

Precedent for Future Projects – Allowing such extensions could set a negative precedent, signaling that procurement processes can be altered to suit specific interests, thereby undermining fair competition in future tenders.

In response, there have been increasing calls for the government to reinstate the original bid deadline and provide clarity on the extension’s rationale. Citizens and industry leaders are urging authorities to uphold transparency and prevent corruption in public projects.

 This issue poses a significant governance challenge for the administration, testing its commitment to accountability. Failure to address these concerns could severely impact Sri Lanka’s development prospects and credibility on the global stage.

By: Staff Writer

April 01, Colombo (LNW): The Sri Lankan government is actively seeking alternative financing for at least a dozen government projects previously supported by USAID. This move follows the recent decision by the U.S. government to freeze foreign assistance, significantly affecting Sri Lanka’s development programs, a senior ministry official stated.

At the time of the funding freeze, USAID was supporting five key projects, including initiatives under the Ministries of Justice, Finance, and Environment. USAID funding accounted for approximately 1.34% of the government’s budget for over ten major programs spanning agriculture, climate change adaptation, disaster preparedness, youth entrepreneurship, and border security, according to Finance Ministry data.

Since 2019, USAID has contributed $233.4 million to Sri Lankan government programs. This included disbursements of $20.4 million in 2019, $41.9 million in 2021, $26 million during the 2022 economic crisis, and $18.1 million plus $24.5 million in 2024 for market-driven growth and governance improvements.

Several major projects have been affected, including the $22.9 million PARTNER project, aimed at enhancing trade regulations, which was halted. The $15 million “Efficient and Effective Justice” program has been suspended. The $19 million Sri Lanka Energy Project, which supported renewable energy initiatives, has also been impacted. Additionally, USAID granted $46 million in 2023 to address the fertilizer crisis, and the sudden funding freeze has left a significant gap.

The Finance Ministry confirmed that Sri Lanka must now seek alternative funding sources to sustain these projects. Efforts are underway to secure financial support from other foreign donors and financial institutions, including countries and organizations with a history of assisting Sri Lanka’s development efforts. The Treasury is also exploring the reallocation of local financial resources to prioritize and sustain key projects affected by the freeze.

In response, the government is emphasizing public-private partnerships to attract private sector investment into public projects, aiming to mitigate the impact of declining foreign aid while maintaining momentum in crucial development sectors. Negotiations with multilateral institutions such as the World Bank and the Asian Development Bank are ongoing to secure loans or grants for sustaining priority projects.

Despite these measures, the abrupt termination of USAID assistance poses challenges such as project delays and the urgent need for alternative financing. The government is working to redirect funds without disrupting essential services, and officials have reiterated their commitment to ensuring project continuity despite the funding freeze.

The Finance Ministry continues discussions with foreign donors and financial institutions to bridge the gap left by the USAID suspension, with a strong focus on leveraging public-private partnerships to sustain development initiatives. While the government navigates these financial hurdles, the urgency of securing new funding remains critical to preventing disruptions in key sectors.

Article’s purpose

This short article is to alert a possibility of Treasury bill market irregularities that can cost to the government and its debt sustainability. This is revealed from the unusual pattern of acceptance of bids at the last Treasury bill auction held on 26 March and recent auction trends.

Auction results

Yields rates were kept unchanged at the previous week’s levels by accepting significantly below the funding requirement, especially for 91D bills.

Selected early warnings and concerns over the auction results

• Acceptance of a negligible amount of 91D bills (Rs. 4,809 mn) way blow the announced amount (Rs. 20,000 mn) and bids (Rs. 21,383 mn) which is a deviation to the recent trend. The trend of lower acceptance of 91D bills was observed from several auctions prior to this although the normal tendency has been to accept bids of 91D much more than the amount announced for the auction.

• Acceptance of sizable amounts from other two longer maturities while this tendency has prevailed for several auctions prior to this auction against the normal pattern.

• Total acceptance from all three maturities was well below the funding requirement (i.e., accepted Rs. 73,380 mn against the requirement of Rs. 100,500). There has been only 13 such instances in 2024 and this is the first instance so far in 2025. 

• It is surprising that even the post-auction, e-mail-based placement system offered at the auction weighted average yields subscribed only a negligible amount of Rs. 519 mn as compared to the funding deficit of Rs. 27,120 mn. Therefore, the placement system which is an instrument created to neutralize market pressures and undue speculations also has failed in this instance.

Auction governance concerns

• This auction seems to be non-compatible with the last monetary policy statement released on same day because keeping Treasury bill yields unchanged by under-funding the government is inconsistent with the money market conditions with excess liquidity and falling interest rates that were stated in the monetary policy statement.

• Why the Central Bank accepted more bids from longer maturities when interest rates are expected to decline in contrast to the best practice of accepting more from shorter maturities in such market conditions is questionable. The best practice is to economize the interest cost to the borrower. Instead, the concerned acceptance has become favourabel to dealers’ or lenders’ profitability and their portfolio management.

• The sudden change in the bidding behaviour reflects market expectations of higher interest rates in the near-term. This may be the reason for the reluctance of the Central Bank to cut policy interest rates despite the persistent deflationary trap confronted by the economy on year-on-basis from August 2024 and monthly basis from January 2024 where the Central Bank forecasts this to continue in the near-term.

• If interest rates prevail to stay or rise as such, given the present deflationary trend, the question arises as to who is to benefit. This may especially help hot capital investors affected by the forced appreciation of the Rupee, given global interest rates are in falling trend in line with reduced inflation.

• The space for this type of questionable yield rate decisions is available because the Central Bank does not have an announced policy for auctioning Treasury bills. If the Central Bank is free to announce and accept any amounts of the three maturities on auctions, the question arises as to what is the purpose of announcing different amounts for the three maturities in the total funding requirement. It would be more transparent to announce auctions soliciting bids for the total funding requirement and to accept bids for different maturities depending on respective demand conditions and debt profile. 

• Therefore, it is a clear insider information if the Central Bank accepts lower or higher amounts inconsistent with the total funding requirement. This has helped the Central Bank to use auctions of government securities as the de factor monetary instrument to drive its interest rate policy, given the activisms of the government securities market, as the policy interest rates are virtually dormant or hypothetical instruments. The public issue here is the additional interest cost involved in under-funding to keep market interest rates at levels as the Central Bank wishes outside the debt market forces. Therefore, government debt market has lost the flexibility to respond to own demand and supply conditions, other than the Central Bank’s monetary preferences. In that context, the government will never have an independent fiscal policy.

Graphical evidence

Acceptance of bids

• Auctions have been driven by 91D maturity but its significance has been reduced in last three auctions by giving the prominence to other two maturities.

Yields and monetary policy

• Treasury bill yields are unofficially driven for the monetary policy as revealed from the Central Bank’s Standing Lending Facility Rate (SLFR).

• In last three months, policy interest rates have been kept artificially high despite the chronic deflationary plight observed from the beginning of 2024 while pushing yield rates arbitrarily below policy interest rates to signal the market of lower interest rate policy. Therefore, Central Bank’s claim that policy interest rates at present levels are appropriate has no basis.

• Rising yield rates of longer maturities and the tendency of keeping policy rates higher are clearly observable from money market interest rates. Therefore, risks to public debt sustainability are hidden in numbers despite artificial stories of international credit ratings, debt restructuring and IMF debt sustainability analysis.

Concluding concerns

• In view of the total volume and turnover of Treasury bills accepted from auctions since August 2021 amounting to Rs. 22.3 trillion, the impact of market manipulation of auction yield rates for non-funding/non-fiscal objectives would be significant on interest cost to the government. This is alarming as the total interest cost in the budget 2025 is expected to be 59.1% of the estimated government revenue.

• Under the new Public Debt Management Act, Government’s Public Debt Management Office and Minister of Finance are responsible for issuance and management of public debt. Therefore, the Central Bank dealing with auctions of government securities within the monetary policy requirements is clearly in conflict of the budgetary and debt management policy of the government.

• The danger of the debt management by the Central Bank during the past 72 years from 1950 is evident from the eventual default of debt by the Central Bank itself in 2022. Therefore, the new Public Debt Management Act should be an attempt to prevent such defaults in future by managing debt in safe, sound and sustainable manner within the interests of the budgetary requirements and fundamentals in the public/tax payer interest.

• Non-transparency of government securities market in the absence of a modern electronic trading platform is a continuous blow to sound debt management and market development.

• As the government is not interested in any change of prevailing systems, given risks to its sustainability, tax payers cannot expect any benefits from debt management stated above in the foreseeable future. Therefore, debt mismanagement and abuse will continue for long-term in future.

(This article is released in the interest of participating in the professional dialogue to find out solutions to present economic crisis confronted by the general public consequent to the global Corona pandemic, subsequent economic disruptions and shocks both local and global and policy failures. All are personal views of the author based on his research in the subject of Economics which have no intension to personally or maliciously discredit characters of any individuals.)

P Samarasiri

Former Deputy Governor, Central Bank of Sri Lanka

(Former Director of Bank Supervision, Assistant Governor, Secretary to the Monetary Board and Compliance Officer of the Central Bank, Former Chairman of the Sri Lanka Accounting and Auditing Standards Board and Credit Information Bureau, Former Chairman and Vice Chairman of the Institute of Bankers of Sri Lanka, Former Member of the Securities and Exchange Commission and Insurance Regulatory Commission and the Author of 13 Economics and Banking Books and a large number of articles published.)

Source: Economy Forward

*The content in this article is of personal views of the author and does not reflect the opinion of LNW in any way.