By: Staff Writer

May 26, Colombo (LNW): A widening regulatory loophole linked to some of the Board of Investment (BOI) companies has sparked growing concern within Sri Lanka’s coconut and edible oil industries, with local producers warning that unrestricted palm oil imports are destabilising the market and threatening rural livelihoods.

Industry representatives claim that crude palm olein imports, many of which are entering the country under export-oriented BOI concessions, are increasingly being diverted into the local market while bypassing standard regulatory oversight. The result, they say, is an uneven playing field that heavily disadvantages domestic coconut oil manufacturers and farmers.

Sri Lanka’s coconut sector supports thousands of smallholder farmers, mill owners, transporters and traders across rural districts. However, over the past several years, the industry has struggled with fluctuating coconut prices, rising production costs, climate-related disruptions and increasing competition from imported edible oils.

To address concerns over unrestricted imports, the government introduced Gazette Notification No. 2222/31 in April 2021, creating a stricter licensing system for edible oil imports. Under the regulations, importers were required to undergo vetting procedures involving the Ministry of Industries and the Coconut Development Authority (CDA) while also paying a levy to the Department of Import and Export Control.

Despite these controls, officials acknowledge that BOI-registered firms continue to enjoy exemptions that effectively place them outside the standard approval process. Many of these companies were initially established under agreements such as the Indo-Sri Lanka Free Trade Agreement to produce export commodities like vanaspati. Yet critics allege that significant volumes of imported palm oil are now finding their way into Sri Lanka’s retail and wholesale markets.

A senior industry ministry official revealed that BOI-backed firms receive direct quota allocations permitting thousands of metric tons of edible oil imports each month. Because these approvals are accepted directly by the Import and Export Controller, shipments can bypass additional scrutiny from the CDA and the Ministry of Industries.

The imported oils are stored in bonded facilities operated through the Sri Lanka Ports Authority, enabling companies to defer customs duties and taxes until products are released into the domestic market. Analysts say this system gives large importers a major cash-flow advantage compared to local manufacturers who must pay taxes upfront before production and distribution.

Local coconut oil producers argue that the price difference created by subsidised imported palm oil has severely disrupted the domestic edible oil market. Consumers facing rising living costs often turn to cheaper alternatives, reducing demand for locally processed coconut oil. As market prices fall, many mills have reportedly scaled back production while coconut farmers face declining incomes.

Industry associations have also raised concerns about the concentration of storage infrastructure at the port. They claim large-scale importers occupy substantial portions of the common-user tank facilities, restricting access for smaller importers and local businesses.

Calls are now mounting for urgent policy reforms. Farmer organisations and coconut millers are demanding that all edible oil imports intended for local consumption receive mandatory clearance from the CDA and Ministry of Industries, irrespective of BOI status. Officials are also evaluating proposals for additional surcharges on bonded oil releases to neutralise what domestic producers describe as an unfair market advantage.

As pressure grows on policymakers, the future of Sri Lanka’s coconut industry may depend on whether regulators can close the loopholes that industry stakeholders say are undermining one of the country’s most important agricultural sectors.

By: Staff Writer

May 26, Colombo (LNW): Sri Lanka has intensified its monetary tightening campaign as authorities battle mounting inflation and renewed depreciation pressure on the rupee, reflecting growing concern over the country’s external vulnerabilities and import-driven economic expansion.

The Central Bank of Sri Lanka this week raised its Overnight Policy Rate by 100 basis points to 8.75 percent, accepting widespread recommendations from economists who urged stronger intervention to stabilise the currency and contain inflationary risks. The decision comes as the rupee weakened sharply amid rising global energy costs and uncertainty caused by escalating tensions in the Middle East.

The Monetary Policy Board acknowledged that elevated petroleum prices and higher domestic energy costs had significantly contributed to inflation reaching 5.4 percent year-on-year in April 2026. However, policymakers also pointed to stronger domestic demand conditions, rapid private sector credit growth, and rising import expenditure as key factors intensifying pressure on the economy.

Economic experts say the latest policy measures reflect a clear shift toward tighter monetary discipline aimed at preventing a repeat of the 2022 financial collapse. By increasing policy rates, the Central Bank intends to reduce credit expansion, discourage speculative borrowing, and curb demand for imports that continue to drain scarce foreign reserves.

Professor Aminda Methsila Perera noted that excess rupee liquidity within the financial system remains one of the primary threats to external sector stability. He explained that surplus liquidity encourages banks to expand lending, which in turn fuels import demand and increases pressure on the exchange rate. According to him, stronger open-market operations and firm interest rate controls are essential to absorb excess liquidity and stabilise market expectations.

At the same time, fiscal authorities are being urged to implement stricter import governance to complement monetary tightening measures. Analysts warn that the gradual easing of vehicle import restrictions, while beneficial for government revenue, could accelerate dollar outflows if not carefully managed.

Professor Priyanga Dunusinghe emphasised that Sri Lanka must enforce tougher consumption controls and maintain discipline over non-essential imports to preserve foreign exchange reserves. Recommendations include imposing additional customs surcharges on luxury imports to reduce unnecessary spending and support external sector stability.

The Central Bank has also reiterated its commitment to maintaining a flexible exchange rate system rather than artificially defending the rupee through reserve depletion. Gross official reserves stood at US$6.8 billion by the end of April despite ongoing foreign debt servicing obligations.

Authorities expect upcoming multilateral inflows, including the next IMF disbursement and additional support from international lenders, to improve reserve buffers and ease external pressures. Policymakers believe that combining aggressive monetary tightening with strict fiscal management will be crucial in restoring investor confidence, anchoring inflation expectations, and protecting Sri Lanka’s economic recovery.

May 26, Colombo (LNW): Vehicle prices in Sri Lanka are expected to increase in the short term following new financial measures linked to imports, with industry representatives warning that tighter regulations and exchange rate fluctuations could place additional pressure on both importers and consumers.

The Central Bank of Sri Lanka (CBSL) has signalled that higher surcharges on imported vehicles, combined with currency volatility, may contribute to rising market prices in the coming months. Industry stakeholders say the changes are already affecting the cost structure of newly imported vehicles and could slow overall demand in the sector.

Representatives of the Vehicle Importers’ Association of Sri Lanka have appealed to authorities to introduce relief measures, particularly for importers who had already opened Letters of Credit or completed import procedures before the latest policy revisions came into effect.

Association Vice President Arosha Rodrigo stated that the reduction in the loan-to-value (LTV) ratio would significantly weaken purchasing power among potential buyers. According to him, lower financing limits would make vehicle ownership less affordable for many middle-income consumers, ultimately reducing sales volumes and restricting future imports.

Meanwhile, Association President Prasad Manage criticised the abrupt revision of leasing regulations, noting that leasing facilities previously available at up to 50 per cent financing have now been reduced to 40 per cent. He warned that the sudden adjustment has created difficulties for dealers attempting to sell vehicles that had already been imported under earlier financial expectations.

Industry representatives further argued that policy changes of this nature should be introduced with transitional arrangements or concessions for shipments already in progress. They cautioned that without such measures, importers may face mounting financial losses while consumers encounter higher prices and reduced financing options.

Market analysts say the developments could temporarily slow activity in Sri Lanka’s recovering automobile sector, although demand for smaller and fuel-efficient vehicles is expected to remain relatively stable despite the tighter credit environment.

May 26, Colombo (LNW): Sri Lanka earned more than US$5.78 billion from exports during the first four months of 2026, recording a 4.3 per cent increase compared with the same period last year, as growth in services and emerging industries helped offset declines in traditional export sectors.

According to provisional figures released by the Export Development Board (EDB), total exports — including both merchandise and services — reached US$5.78 billion between January and April, while export earnings for April alone rose six per cent year-on-year to US$1.38 billion.

Merchandise exports during the four-month period climbed 4.8 per cent to US$4.52 billion, while services exports were estimated at US$1.26 billion, reflecting the increasing contribution of digital and knowledge-based industries to the economy.

Despite the overall growth, Sri Lanka’s apparel sector continued to face pressure from weaker demand in Western markets. Apparel and textile exports declined 7.4 per cent year-on-year to US$1.62 billion during the January–April period. Shipments to the United States fell by 5.65 per cent, while exports to the European Union and the United Kingdom dropped by 7.71 per cent and 9.71 per cent respectively.

Tea exports also remained under strain, with earnings falling 5.58 per cent to US$451.58 million during the first four months of the year. In April alone, tea export income declined 6.82 per cent, largely due to reduced shipments to Iraq, Libya, Saudi Arabia and the United Arab Emirates.

However, several non-traditional sectors posted strong performances. Electrical and electronic component exports surged 43.55 per cent year-on-year to US$185.54 million, driven by increased demand for electrical transformers, insulated wires, switches and industrial panels.

Processed food and beverage exports rose 30.62 per cent to US$237.7 million, while coconut-based products recorded a 21.38 per cent increase in earnings, reaching US$406.28 million during the period under review.

Seafood exports also expanded significantly, climbing 24.52 per cent to US$93.34 million due to higher exports of frozen and fresh fish. Meanwhile, ICT exports were estimated at US$581.7 million, reflecting a strong 22.63 per cent increase compared with the corresponding period last year.

Among export destinations, the United States remained Sri Lanka’s largest overseas market, accounting for around 22 per cent of total merchandise exports, although cumulative exports to the US declined 2.09 per cent to US$945.76 million.

India strengthened its position as Sri Lanka’s second-largest export destination, overtaking the United Kingdom after exports to India rose 8.9 per cent to US$364.15 million during the January–April period.

Meanwhile, exports to the United Arab Emirates fell 16.24 per cent, while exports to Middle Eastern markets overall — excluding Cyprus and Egypt — declined 19.31 per cent, highlighting the impact of geopolitical tensions and slowing regional demand on trade activity.

May 26, Colombo (LNW): The Sri Lankan Rupee recorded a noticeable improvement against the US Dollar on Tuesday, with several commercial banks adjusting their exchange rates amid renewed market confidence and stabilising foreign currency demand.

A number of leading banks revised their dollar selling rates downward, with some institutions offering the currency at nearly Rs. 326, signalling a stronger local currency position compared to the previous trading day.

NDB Bank reduced its US Dollar buying rate from Rs. 325.50 to Rs. 321.50, while the selling rate fell from Rs. 334.50 to Rs. 330.50. Commercial Bank also reported a significant decline in its rates, bringing the buying price down to Rs. 314.04 from Rs. 324.47, while the selling rate eased from Rs. 335.50 to Rs. 326.00.

Sampath Bank followed a similar trend, lowering its buying rate to Rs. 318 from Rs. 321.50 and trimming its selling rate from Rs. 330.50 to Rs. 327.00.

Meanwhile, People’s Bank recorded a slight upward adjustment in both rates, with the buying price moving to Rs. 321.57 and the selling rate increasing marginally to Rs. 330.67.