By: Staff Writer
March 29, Colombo (LNW): Sri Lanka’s apparel industry is facing a sharp downturn, with February 2026 export earnings dropping by over 11% year-on-year, exposing the sector’s vulnerability to weakening global demand and shifting market dynamics.
Data released by the Joint Apparel Association Forum (JAAF) shows exports fell to $361.2 million, with declines recorded across all major markets. The steepest contraction came from the European Union, where exports plunged by nearly 20%, while shipments to the United States and United Kingdom also declined, albeit at a slower pace.
This broad-based slowdown signals more than a temporary dip. Cumulative exports for the first two months of 2026 are down nearly 7%, indicating that the sector is entering a sustained period of demand compression. Europe, a key destination for Sri Lankan garments, appears to be at the centre of this decline, reflecting weaker consumer spending and economic uncertainty in the region.
However, industry analysts stress that the issue is not unique to Sri Lanka. Competing exporters such as Bangladesh have reported even sharper drops in shipments to Europe, suggesting a wider correction in global apparel demand rather than a loss of competitiveness for any single country.
Despite this, Sri Lanka’s structural challenges are becoming more visible. High operating costs, logistical inefficiencies, and longer lead times are placing local manufacturers at a disadvantage in an increasingly competitive global sourcing environment. As buyers tighten margins and demand faster delivery, these domestic constraints risk eroding Sri Lanka’s position in global supply chains.
The current situation highlights a deeper issue: while external demand shocks affect all exporting nations, the ability to adapt varies significantly. Countries with lower costs and more efficient production systems are better positioned to weather downturns, leaving higher-cost producers like Sri Lanka under greater pressure.
Industry stakeholders argue that improving logistics, reducing production costs, and enhancing trade facilitation are now urgent priorities. Without these reforms, the sector could struggle not only to recover lost ground but also to retain existing market share.
In the short term, the outlook remains uncertain. With global demand still subdued, particularly in Europe, export performance is likely to remain under pressure in the coming months.
Ultimately, the current downturn serves as a stress test for Sri Lanka’s apparel industry. While the global slowdown provides context, it also underscores the need for structural reforms at home. The sector’s resilience will depend not just on external recovery, but on how quickly and effectively it can address its internal weaknesses and reposition itself in an increasingly competitive global market.
Global Demand Slump Hits Sri Lanka Apparel Exports Hard
From Laws to Enforcement: Sri Lanka’s Anti- Money Laundering Test Intensifies
By: Staff Writer
March 29, Colombo (LNW): Sri Lanka’s anti-money laundering drive is shifting from legislative reform to real-world enforcement, as global evaluators prepare to assess whether the country’s systems are delivering results beyond policy commitments.
The ongoing review, conducted by the Asia/Pacific Group on Money Laundering (APG) under the umbrella of the Financial Action Task Force (FATF), places Sri Lanka under intense international scrutiny. While early stages of the process have focused on legal compliance, the next phase will test effectiveness often the most difficult hurdle for developing economies.
Financial Intelligence Unit Director Subhani Keerthiratne confirmed that Sri Lanka has so far met all key submission deadlines, including its Technical Compliance Report. This document outlines how domestic laws align with FATF’s 40 recommendations, a necessary but insufficient condition for a favourable rating.
The real challenge lies in proving that these laws are actively enforced. Authorities must now demonstrate performance across 11 “immediate outcomes,” ranging from financial intelligence gathering to successful prosecution of money laundering and terrorism financing cases.
Central Bank Governor Nandalal Weerasinghe has acknowledged that legal reforms alone will not suffice. While amendments to critical legislation are progressing, he emphasised the need for measurable results such as increased investigations, stronger regulatory oversight, and effective coordination between institutions.
This shift reflects a broader global trend. International bodies are no longer satisfied with legal frameworks that exist only on paper; they demand evidence that systems are functioning in practice.
Sri Lanka’s upcoming on-site evaluation in October will be a decisive moment. APG assessors will engage directly with banks, regulators, and law enforcement agencies to evaluate how effectively the system detects and disrupts illicit financial activity.
Progress has been noted in institutional coordination and stakeholder engagement, with both public and private sectors increasingly aligned on compliance requirements. However, gaps remain, particularly in demonstrating consistent enforcement and achieving successful legal outcomes.
The implications extend beyond compliance. Strong AML/CFT performance is essential for maintaining correspondent banking ties, which underpin international trade and financial flows. Any weaknesses could raise red flags among global partners, increasing transaction costs and limiting access to foreign markets.
Moreover, the risk of grey-listing looms as a significant concern. Such a development would signal deficiencies in Sri Lanka’s financial safeguards, potentially undermining investor confidence at a critical juncture in the country’s economic recovery.
With the final evaluation set for 2027, Sri Lanka’s AML journey is entering its most demanding stage. The focus is no longer on promises or policies, but on proof whether the system can deliver real, measurable results in combating financial crime.
Sri Lanka Moves to Phase out Cess under IMF Pressure
By: Staff Writer
March 29, Colombo (LNW): Sri Lanka’s decision to gradually dismantle its long-standing cess tax regime marks a pivotal shift in trade policy, driven largely by commitments to the International Monetary Fund (IMF) and broader economic reform goals. While authorities insist the move will enhance competitiveness and align with global norms, concerns remain about its impact on domestic industries and import dynamics.
Industry Ministry Secretary Thilaka Jayasundara clarified that the cess levy traditionally used to protect local manufacturers and manage imports will not be abruptly abolished. Instead, the Government has adopted a phased reduction strategy beginning April 2026, with an initial 50% cut, followed by further reductions of 25% in 2027 and the final 25% by 2029.
However, the timeline has been deliberately slowed for vulnerable sectors. A selected group of 107 HS codes across eight industries will only begin reductions in 2027, reflecting concerns about exposing sensitive domestic producers too quickly to foreign competition.
The cess tax, imposed under the Export Development Act of 1979, has long functioned as a para-tariff, often ranging from 1% to as high as 35%. While effective in shielding local industries and discouraging non-essential imports, it has also been criticised for inflating production costs especially for export-oriented sectors dependent on imported raw materials.
The reform covers approximately 7,800 HS codes, with 2,634 already approved for phased elimination by the Cabinet. Notably, 697 intermediate goods will see cess removal between 2026 and 2028, while 265 textile-related items and low-rate goods will experience immediate or early relief. This signals a targeted approach aimed at easing input costs for exporters.
At the heart of this policy shift lies Sri Lanka’s agreement with the IMF. Following approval of a $206 million financing package in December 2025, the Government committed to maintaining an open trade regime and avoiding restrictive import measures. The Letter of Intent explicitly ruled out new trade barriers or currency restrictions inconsistent with IMF rules.
Central Bank Governor Nandalal Weerasinghe reinforced that structural reforms in trade, fiscal policy, and labour markets are essential regardless of external shocks. Ongoing discussions with the IMF regarding adjustments to the Extended Fund Facility (EFF) program further highlight the significance of these reforms amid global uncertainties.
Economically, the removal of cess is expected to lower production costs, improve product quality, and enhance export competitiveness. However, it also raises the likelihood of increased imports, potentially challenging local manufacturers unprepared for intensified competition.
To mitigate these risks, the Government plans to retain safeguards such as anti-dumping and countervailing measures to prevent market distortions from low-quality or unfairly priced imports.
Ultimately, the phased approach reflects a balancing act: fulfilling IMF obligations while attempting to cushion domestic industries. Whether this strategy successfully boosts exports without undermining local production will be a critical test of Sri Lanka’s economic transition in the years ahead.
Pakistan Secures Strait of Hormuz Passage Deal with Iran Amid Regional Tensions
March 29, LNW (Colombo): Pakistan has reached an agreement with Iran to allow 20 Pakistani-flagged vessels to pass through the strategically vital Strait of Hormuz, in a move aimed at easing a severe energy crisis.
Ishaq Dar announced the development on X, stating that two ships will transit daily under the arrangement. He described Iran’s decision as a positive step toward regional stability, calling it “a harbinger of peace” and a constructive gesture during a period of heightened tensions.
In a notable diplomatic signal, Dar addressed his announcement to key international figures, including JD Vance, Marco Rubio, U.S. envoy Steve Witkoff, and Iranian Foreign Minister Abbas Araghchi. This move underscores Islamabad’s broader efforts to support diplomatic solutions amid ongoing regional conflict.
The agreement comes against the backdrop of escalating tensions following coordinated military actions by the United States and Israel against Iran on February 28, which reportedly resulted in the death of Ali Khamenei and triggered a wider conflict. The unrest has led to significant casualties and disrupted global markets, with the Strait of Hormuz—one of the world’s most critical oil transit routes—largely inaccessible until now.
Observers say the new shipping arrangement could help stabilize energy supplies and reduce pressure on international trade, while also opening a potential pathway for further diplomatic engagement in the region.
Strict Action Looms for Buses Failing to Display Updated Fare Charts
By: Isuru Parakrama
March 29, Colombo (LNW): Public transport operators in Sri Lanka’s Western Province have been warned to clearly exhibit newly revised fare tables inside their buses or face tough penalties.
The Road Passenger Transport Authority (RPTA) has made it compulsory for all buses to display the updated pricing information in a visible manner for passengers.
Chairman Gamini Jayasinghe stated that this measure is intended to improve transparency and prevent disputes over fares.
Beginning Monday, inspection teams will be deployed across the province to carry out spot checks on both private and state-run buses. Authorities say the inspections will be unannounced and conducted at key transit points as well as along major routes.
Operators found flouting the directive risk severe consequences, including substantial fines and the possible suspension or cancellation of their route permits. Officials stressed that repeat offenders would face stricter enforcement action.
Sri Lanka Railways Moves Towards Fully Digital Ticketing System
By: Isuru Parakrama
March 29, Colombo (LNW): Sri Lanka is preparing to phase out traditional paper train tickets as part of an ambitious plan to modernise its railway network with a fully digital ticketing system.
Deputy Minister of Transport and Highways, Prasanna Gunasena, announced that new electronic ticket validation devices have already begun appearing at selected stations, signalling the start of a broader technological upgrade. The initiative is intended to simplify travel for passengers while improving efficiency across the network.
According to officials, the new system will build upon existing online reservation services, allowing commuters to book, store, and present tickets digitally via mobile devices or smart cards. Authorities believe this shift will not only reduce queues at ticket counters but also curb ticket fraud and revenue leakages.
A pilot programme is set to commence in April along the Kelani Valley line, with initial implementation at stations including Narahenpita, Nugegoda, Makumbura, Homagama, and Padukka. During this phase, passengers will be able to test the new system while staff gather feedback to refine operations.
The government aims to complete the island-wide rollout before the end of the year, provided the pilot proves successful. Officials added that future enhancements could include real-time seat availability, integrated transport payments, and improved scheduling information, offering commuters a more seamless and modern travel experience.
Sri Lanka Introduces Digital Asset Declaration Platform to Strengthen Transparency
By: Isuru Parakrama
March 29, Colombo (LNW): Sri Lanka is set to roll out a centralised electronic platform for the declaration of assets and liabilities from March 31, marking a significant shift towards digital governance.
The new system is designed to replace the largely paper-based process currently in use, enabling public officials and relevant individuals to submit their financial disclosures through a streamlined online interface. Authorities believe this transition will reduce delays, minimise errors, and improve overall accountability.
Officials noted that the platform will incorporate advanced verification tools capable of flagging inconsistencies in declarations, as well as identifying patterns that may suggest unexplained wealth accumulation. This is expected to enhance the ability of regulators to detect and investigate potential misconduct more effectively.
The Commission to Investigate Allegations of Bribery or Corruption (CIABOC) has described the initiative as a key milestone in modernising Sri Lanka’s anti-corruption framework. By leveraging technology, the commission aims to reinforce institutional independence while ensuring greater transparency in public service.
In addition, the system is expected to improve data accessibility for oversight bodies and could pave the way for closer coordination with other regulatory agencies, further tightening scrutiny over financial disclosures in the country.
Legal Action Launched Against Traders Amid Crackdown on Rice Hoarding
By: Isuru Parakrama
March 29, Colombo (LNW): Sri Lankan authorities have initiated legal proceedings against a number of traders accused of stockpiling rice and withholding supplies from ordinary consumers.
The cases are being filed before the Maligakanda Magistrate’s Court following a series of enforcement நடவடitions carried out by the Consumer Affairs Authority (CAA), acting on public complaints about irregular trading practices.
One such operation took place earlier today at the Kirulapone Public Market, where officials uncovered alleged attempts to manipulate supply. Investigators reported that certain vendors were deliberately restricting access to rice stocks, choosing instead to channel supplies to bulk buyers.
In one instance, a trader holding a valid retail licence was found to be diverting rice exclusively to hotels, bypassing regular retail customers altogether. Authorities view this as a serious breach of trading regulations, particularly at a time when demand for staple foods remains high.
The inspection reportedly led to a tense confrontation between enforcement officers and a shop owner, highlighting the growing friction between regulators and some segments of the trading community.
The CAA has intensified its island-wide inspections in the run-up to the festive season, with a particular focus on essential commodities such as rice, sugar, and flour. Officials warn that those found hoarding goods, refusing to sell, or inflating prices unfairly will face strict legal consequences.
Consumers have also been encouraged to report suspicious market behaviour, as the government steps up efforts to stabilise food distribution and protect household budgets during a period of economic pressure.
Emergency Regulations Prolonged as Sri Lanka Responds to Cyclone Aftermath
By: Isuru Parakrama
March 29, Colombo (LNW): Sri Lanka’s nationwide State of Public Emergency has been extended for a further month, following a directive issued under the authority of President Anura Kumara Dissanayake.
The formal notification, released by Presidential Secretary Dr N. S. Kumanayake, confirms that the extension is intended to support ongoing recovery efforts after the severe impact of Cyclone Ditwah, which has disrupted several parts of the island in recent weeks.
Authorities indicated that the continuation of emergency provisions will enable the government to act swiftly in safeguarding communities, restoring stability, and preventing further deterioration of living conditions in affected regions. The move is also aimed at ensuring that relief operations and reconstruction work proceed without administrative delays.
In tandem with the extension, the government has renewed regulations designating a broad range of public sector functions as essential services. This includes operations carried out by state institutions, local authorities, and cooperative bodies, all of which are considered critical to maintaining day-to-day life.
Key sectors such as electricity generation and distribution, fuel and gas supply, healthcare delivery, and public transport will remain under essential service status. Officials say this measure is necessary to guarantee uninterrupted access to vital services while the country continues to recover from the cyclone’s aftermath.
India Steps In as Sri Lanka Secures Emergency Fuel Lifeline
By: Isuru Parakrama
March 29, Colombo (LNW): President Anura Kumara Dissanayake has conveyed his appreciation to Indian Prime Minister Narendra Modi and the Government of India for their timely assistance in helping Sri Lanka navigate its ongoing energy shortfall.
The President revealed that he had recently held discussions with Prime Minister Modi regarding the disruption to fuel imports, which has been triggered by escalating tensions in the Middle East. These developments have significantly strained Sri Lanka’s already fragile energy supply chain.
In a message shared on social media, President Dissanayake acknowledged India’s rapid response, noting that a substantial fuel consignment had reached Colombo. He also extended thanks to India’s External Affairs Minister for maintaining close coordination throughout the process.
The shipment, comprising approximately 38,000 metric tonnes of diesel and petrol, docked at Colombo Harbour on 28 March. Officials confirmed that the delivery followed high-level diplomatic engagement between the two nations earlier in the week, underscoring the importance of regional cooperation during times of crisis.
Further discussions between senior foreign affairs representatives from both countries also contributed to expediting the arrangement, ensuring that the supply reached Sri Lanka without further delay.
Prior to this development, Lanka IOC had arranged fuel imports from suppliers in the Middle East and Singapore. However, those deliveries were cancelled after suppliers declared force majeure, citing logistical challenges and instability in the region that rendered transport unfeasible.
Faced with the risk of severe shortages, Sri Lanka turned to India for urgent assistance. The latest shipment forms part of these emergency measures, facilitated through Indian Oil Corporation.
Authorities in Colombo have indicated that this support will play a crucial role in maintaining uninterrupted fuel distribution across the country, easing pressure on both consumers and essential services.