By Robin Hood

The NDB Bank fraud was the largest banking fraud in the country and when the numbers finally stopped moving, the damage was not 380 million rupees. It was not even close. The true figure, once the general ledger had been properly excavated, stood at 13.2 billion rupees, roughly 44 million US dollars drained through what investigators now describe as a sustained, systematic manipulation of bank accounts.

Many people are in custody. But a few people did not create the conditions for this. Institutions did.
The first question belongs to the Board. In January, an internal probe was triggered by a multi million rupee irregularity. That probe, by any reasonable standard of governance, should have been the ignition point for a total systems audit. It was not.

Instead, what followed appears to have been a narrow, contained review, the kind of investigation designed to answer the question already asked, rather than the questions not yet imagined.

Months later, the initial public estimate of the damage came in at 380 million rupees. The actual figure was thirty-five times larger. That gap is not a rounding error. It is a diagnostic failure. It tells us that the Board either lacked the technical literacy to interrogate their own risk infrastructure, or chose not to. A board that cannot read the room when multi million rupees goes missing is a board operating on institutional faith rather than financial vigilance.

Then there is the four-eyes principle, the elementary two-person authorization requirement that governs high-value transactions in every credibly run financial institution. A junior manager-level employee reportedly bypassed this control repeatedly, at scale, over time. The principle did not fail. The culture around it did.

Rules without enforcement culture are decorations. The Board approved the framework. The Board is responsible for whether it breathed.
EY audited the books. The 2025 year-end audit, by all available accounts, did not flag the general ledger discrepancies that sit at the center of this case. This demands scrutiny that goes beyond disappointment. External auditors are not merely contract reviewers. They carry a public assurance function. When they sign off on a financial institution’s controls, depositors and counterparties rely on that signature.

The central question here is not whether EY followed its own sampling methodology. The question is whether that methodology was calibrated for comfort or for risk. Materiality thresholds, the levels below which individual entries are considered immaterial and therefore unreviewed, can, if set too generously, allow dozens of fraudulent entries to aggregate quietly into a catastrophic sum. The auditor’s relationship with the institution, particularly its tenure, warrants examination. Familiarity is the enemy of skepticism.

The Central Bank of Sri Lanka sits at the apex of this accountability architecture, and its position is the most difficult to defend. Banks report to the Bank Supervision Department regularly and in granular detail. Inter-bank settlement patterns, capital adequacy ratios, and liquidity movements all flow through that department. If a senior banker was being questioned internally in January and rumors were in circulation, the CBSL’s supervisory intelligence network should have registered pressure long before April.

Instead, the regulatory response came after the capital was already impaired, dividend suspensions and expansion halts imposed as stabilisation measures rather than preventative ones. Liquidity support extended after the damage is not oversight. It is consequence management. The distinction matters enormously.
A few individuals are in custody. That is where the legal process begins, and it should continue. But criminal accountability for the actors cannot substitute for institutional accountability for the architecture. A mid-level manager who moves 13.2 billion rupees without triggering a kill-switch is not a mastermind operating against an otherwise sound system. He is a symptom of one that was never truly sound. The board authorised the systems. The auditors declared them safe. The regulator watched from a distance.

The vault was open. The question Sri Lanka must now answer honestly is who was supposed to be watching it.

Sri Lanka is edging closer to unlocking approximately $700 million in fresh financing under its ongoing agreement with the International Monetary Fund, following a staff-level understanding on the fifth and sixth reviews of its $3 billion Extended Fund Facility. While the development signals renewed international confidence, the funding remains conditional on the Government’s ability to deliver politically sensitive reforms.

At the centre of the IMF’s conditions is the restoration of cost-reflective pricing for electricity and fuel long a contentious issue domestically. Authorities must also demonstrate continued progress in debt restructuring and secure necessary financing assurances before the IMF Executive Board grants final approval, expected in the coming months.

Officials including IMF mission chief Evan Papageorgiou indicated that Sri Lanka has already achieved notable macroeconomic improvements. The economy grew by 5% in 2025, marking a recovery from its recent crisis, while inflation rebounded modestly to 2.2% year-on-year by March 2026. Foreign reserves have also strengthened, reaching $7 billion—an important buffer against external shocks.

Hitherto beneath these headline gains lies a more fragile reality. The IMF has cautioned that both domestic and global risks continue to threaten stability. Rising energy prices linked to geopolitical tensions in the Middle East have increased import costs, while disruptions to tourism and worker remittances are straining foreign exchange inflows. Additionally, post-disaster reconstruction following Cyclone Ditwah is placing new pressure on public finances.

 Fiscal discipline remains a key test. Although tax revenues have improvedparticularly through vehicle imports—the IMF has urged the Government to deepen reforms by expanding the tax base, tightening compliance, and curbing leakages. Public spending must also be carefully managed, with an emphasis on transparency and efficiency under existing financial regulations.

Equally critical is the Government’s handling of social protection. Cost-reflective pricing, while necessary for fiscal sustainability, risks burdening lower-income households. The IMF has therefore stressed the importance of targeted welfare measures to cushion vulnerable groups, highlighting gaps in coverage and effectiveness within existing safety nets.

The broader reform agenda extends beyond fiscal measures. Strengthening central bank independence, maintaining exchange rate flexibility, and addressing weaknesses in the financial sector particularly non-performing loans are all seen as essential to sustaining recovery.

Governance reforms also feature prominently. The IMF has welcomed Sri Lanka’s anti-corruption initiatives but emphasised that implementation will be the true measure of credibility. Structural changes in trade policy, digitalisation, and labour markets are likewise viewed as necessary to secure long-term, inclusive growth.

The Government, led by President Anura Kumara Dissanayake, now faces a delicate balancing act: meeting IMF benchmarks to unlock funding while managing domestic political and social pressures. Whether Sri Lanka can sustain reform momentum will determine not only the release of the next tranche, but also the durability of its economic recovery.

A major financial scandal at National Development Bank PLC has triggered calls for sweeping reforms and direct regulatory intervention, as authorities grapple with the fallout from a Rs. 13.2 billion internal fraud. The crisis has not only shaken depositor confidence but also raised broader concerns about governance standards within Sri Lanka’s banking system.

The Committee on Public Finance has taken a leading role in scrutinizing the issue, highlighting serious lapses in corporate governance and delayed disclosure of critical information. During recent parliamentary proceedings, chaired by Harsha de Silva, the committee emphasized that such failures are unacceptable, particularly in institutions entrusted with public funds.

The fraud itself reveals alarming operational weaknesses. Over a period exceeding 18 months, insiders allegedly manipulated CEFT transactions particularly during less-monitored weekend windows to execute unauthorized transfers. Despite clear warning signals, including abnormal spikes in receivables, management failed to act decisively.

The financial consequences have been substantial. The bank has absorbed the full loss, leading to a projected Rs. 4 billion loss in the first quarter of 2026 and a total net impact of approximately Rs. 7 billion. Although capital buffers remain above regulatory thresholds, the incident has strained the bank’s financial position and reputation.

In response, the Central Bank of Sri Lanka is under pressure to act decisively. One proposal gaining traction is the appointment of a seasoned banking professional to take temporary control of NDB’s management. This leadership change, expected to last at least three months, would focus on stabilizing the institution and implementing urgent corrective measures.

The proposed intervention aims to reinforce internal controls, address procedural gaps, and improve transparency. Strengthening operational discipline is seen as essential to restoring depositor trust, which has been shaken by the scale and duration of the fraud.

Simultaneously, law enforcement authorities are intensifying investigations. Multiple suspects are currently in remand custody, with allegations involving cryptocurrency transactions and coordinated internal collusion. The complexity of the scheme has underscored the need for more sophisticated monitoring systems within banks.

CBSL Governor Nandalal Weerasinghe has acknowledged the seriousness of the situation, confirming that a preliminary investigation is underway. The Central Bank is expected to report back to Parliament with detailed findings and recommendations.

Analysts argue that the NDB crisis is a wake-up call for the entire financial sector. It highlights the risks of complacency in governance and the need for continuous vigilance in regulatory oversight. The incident also raises questions about the effectiveness of existing supervisory frameworks.

As Sri Lanka navigates this challenge, the focus will be on restoring confidence and preventing recurrence. The success of the proposed intervention and the broader reform agenda will be crucial in safeguarding the integrity and stability of the country’s banking system.

Sri Lanka’s tourism industry, a cornerstone of economic recovery, is under mounting pressure as global shocks test the policy framework of the National People’s Power (NPP) government led by the Janatha Vimukthi Peramuna (JVP). Since taking office in November 2024, the administration has promoted a state-guided, reform-driven tourism model. However the latest figures reveal how vulnerable the sector remains to external disruptions.

Tourist arrivals plunged 22% year-on-year in the first eight days of April, falling to 39,627 from 50,542 a year earlier. Average daily arrivals also declined sharply to 4,953, down from 6,318, reflecting the immediate impact of escalating conflict in the Middle East on global aviation routes. These disruptions have particularly affected long-haul travel to island destinations like Sri Lanka.

Despite the downturn, cumulative arrivals reached 780,261 by 8 April, marking a modest 1% year-on-year increase. This growth was driven largely by strong inflows earlier in the year, indicating that the sector had been on a recovery path before geopolitical tensions intensified.

Market composition remains heavily concentrated. India leads with 158,628 visitors’ year-to-date, followed by the UK with 82,465 and Russia with 67,982. In early April alone, the UK contributed 4,045 arrivals, Australia 3,394, China 2,643, and Russia 2,064, alongside steady inflows from Germany, France, Bangladesh, the United States, and Switzerland. This dependence on a limited number of markets continues to expose structural weaknesses.

The NPP government has attempted to address these vulnerabilities through integrated tourism development, including heritage-led projects such as the redevelopment of Galle Fort. These initiatives aim to diversify offerings and increase visitor spending by combining culture, leisure, and emerging IT-linked tourism zones.

However, the sector is simultaneously grappling with climate-related disruptions. Recent cyclonic activity in the Indian Ocean has damaged coastal infrastructure and triggered booking cancellations, particularly among small and medium enterprises reliant on beach tourism.

Critics argue that while the government’s long-term strategy is structurally sound, it lacks short-term crisis management mechanisms. Aviation disruptions and extreme weather have exposed gaps in resilience planning, while delays in implementing public-private partnerships have slowed project execution.

Looking forward, analysts stress the need for diversification beyond traditional markets, improved air connectivity, and investment in climate-resilient infrastructure. Strengthening regional tourism and digital outreach could also help offset global uncertainties.

As Sri Lanka navigates these intersecting challenges, the NPP government’s ability to align its ideological vision with practical, responsive policymaking will determine whether the tourism sector can sustain recovery or face renewed instability.

A sweeping redevelopment initiative targeting Galle Fort is positioning the historic enclave as a future hub for tourism, IT, and leisure but not without raising complex questions about heritage management and urban transformation.

Spearheaded by the Urban Development Authority, the Galle Regeneration Project seeks to repurpose key state-owned buildings through adaptive reuse. Among the most significant moves is the transfer of the High Court and Magistrate’s Court buildings into a tourism-focused development under a PPP model, following their relocation to a modern judicial complex outside the fort.

Authorities frame the initiative as a solution to longstanding urban challenges. Heavy daytime traffic caused by administrative offices and a lack of nighttime activity have undermined the fort’s potential as a dynamic tourist destination. By relocating institutional functions, planners aim to create a lively, accessible environment that attracts visitors beyond daylight hours.

The project builds on earlier conservation successes. The restoration of the Dutch Hospital into a commercial precinct demonstrated the economic viability of adaptive reuse. More recently, conservation work on the old police barracks and residence, as well as municipal buildings near the Dutch cemetery, has paved the way for similar transformations.

Five key heritage structures including the old post office and the historic Dutch Commissariat warehouse—have been prioritized for conservation under plans developed by the Galle Heritage Foundation. According to project updates, work has already begun on several of these sites, with at least one fully completed.

International backing, including World Bank-supported infrastructure improvements, adds momentum to the initiative. Upgraded walkways along the fort’s granite ramparts and enhanced monument lighting are expected to improve visitor experience and safety.

However, the redevelopment has sparked debate among conservationists and local stakeholders. Critics argue that increasing commercialization could erode the fort’s cultural significance and marginalize its residential character. There are also concerns about whether PPP-driven projects will prioritize public interest or private profit.

Despite these concerns, the government remains confident that the project will strengthen Sri Lanka’s tourism economy. With visitor numbers already exceeding 300,000 annually, officials see untapped potential in repositioning Galle Fort as a multi-functional destination blending history, leisure, and innovation.

The outcome of this initiative could set a precedent for heritage site management across the country. Whether it becomes a model of sustainable development or a cautionary example will depend on how effectively it balances preservation with progress.