Category: Daily Financial Times

Cyclone Ditwah, which swept across Sri Lanka at the end of November, caused massive damage to the country, the extent of which need not be mentioned here, as all are aware of it by now. Heated arguments went on among many parties with regard to how this destruction could have been mitigated and who should take responsibility. Although there may have been shortcomings in several aspects of how we responded to Ditwah, this article highlights a critical area that urgently requires attention if we are to protect ourselves from similar hazards in the future.

As is common in many situations, it has once again showcased a concerning weakness in the country’s disaster-management cycle, the gap between issuing early warnings and the expected public response. The Meteorological Department, the Irrigation Department, the National Building Research Organisation, and other authorities issued continuous warnings to evacuate well in advance of imminent threats of flooding, landslides, and water hazards. However, the level of preparedness and community reaction fell short, leading to far greater personal property damage, including loss of a few hundred lives.

Cycle of natural disasters

Sri Lanka is not unfamiliar with natural disasters. One of the most devastating disasters in our history could be considered the 2004 Tsunami event, which resulted in over 35,000 deaths and over $1 billion in property damage in the coastal belt. After the event, the concepts of disaster management were introduced to the country, which we have been adhering to since then. Again in 2016, the country faced massive river flooding, especially in western and southern regions, and until recently experienced repeated floods and landslides due to rains caused by atmospheric disturbances, though less in scale. Each of these events paved the way for relevant authorities to discuss and take appropriate measures on institutional readiness, infrastructure resilience, and public awareness. Yet Cyclone Ditwah has demonstrated that despite improvements in forecasting and communication, well supported by technological advancements, the translation of warnings into action remains critically weak.

The success of early-warning systems depends on how quickly and effectively the public and relevant institutions respond. In the case of Ditwa, the Department of Meteorology issued warnings several days beforehand, supported by regional cyclone forecasting of neighboring countries. Other organisations previously mentioned circulated advisories with regard to expected flood risk and possible landslide threats on television, radio, and social media, with continuous updates. All the flood warnings were more than accurate, as low-lying areas were affected by floods with anticipated heights and times. Landslide risks, too, were well-informed for many areas on a larger spatial scale, presumably due to the practical difficulties of identifying such areas on a minor scale, given that micro-topography in hill country is susceptible to localised failures. Hence, the technical side of the early-warning system worked as it should have. However, it is pathetic that the response from the public did not align with the risk communicated in most areas.

In many affected areas, people may have underestimated the severity of the hazard based on their past experiences. In a country where weather hazards are common, some may have treated the warnings as routine messages they hear day by day. As all the warnings do not end up in severe outcomes, some may have disregarded them as futile. In the meantime, there can be yet another segment of the population that did not have adequate knowledge and guidance on what specific actions to take after receiving a warning. This could especially happen if the responsible authorities lack necessary preparedness plans. Whatever the case may be, lapses in response to early warnings magnified the cyclone’s impact.

Preventive actions

Enforcing preventive actions by authorities has certain limitations. In some areas, even the police struggled to move people from vulnerable areas owing to community resistance. This could be partly due to a lack of temporary accommodation prepared in advance. In some cases, communities were reluctant to relocate due to concerns over safety, privacy, and the status quo. However, it should be noted that people living in low-lying areas of the Kelani River and Attanagalu Oya had ample time to evacuate with their valuable belongings.

Hazard warnings are technical outputs of various models. For them to be effective, the public must understand them, trust them, and take appropriate action as instructed. This requires continuous community engagement, education, and preparedness training. Sri Lanka must therefore take more actions on community-level disaster preparedness programs. A culture of preparedness is the need of the day, and schools, religious institutions, and community-based organisations can play an important role in making it a reality. Risk communication must be further simplified so that people can easily understand what they should do at different alert levels.

Cyclone Ditwah has left, giving us a strong message. Even an accurate weather forecast and associated hazard warnings cannot save lives or property unless the public responds appropriately. As it is beyond doubt that climate change intensifies the frequency and severity of extreme weather events, people in Sri Lanka have to consider preparedness as a routine part of life and respond to warnings promptly to mitigate damage from future disasters.

The Securities and Exchange Commission of Sri Lanka (SEC) yesterday warned the investing public that ‘Gladius South Asia’ is not licenced by the SEC to operate as a Market Participant within or outside Sri Lanka.

‘The SEC does not regulate, nor does it grant licences for entities to operate in foreign jurisdictions,’ a statement issued by capital markets regulator said.

It has come to the attention of the SEC that Gladius South Asia, in some instances, informs clients that it is licensed by the Financial Conduct Authority (FCA) in the United Kingdom. However, the FCA has officially confirmed to the SEC that Gladius South Asia is not a registered entity with the FCA. ‘Please note that in the United Kingdom, all financial services activities must be authorised or registered by the Financial Conduct Authority (FCA),’ the SEC added.

The Regional Development Bank (RDB) has recorded its best-ever third quarter results with a Profit Before Tax (PBT) of Rs. 3.5 billion for the nine months ending 30 September 2025, a substantial increase compared to the Rs. 663 million recorded during the corresponding period last year. Profit After Tax (PAT) surpassed Rs. 1.6 billion, reflecting strong operational resilience and strategic execution.

RDB Chairman Lasantha Fernando attributed the bank’s remarkable results to strategic initiatives implemented at the beginning of the year and a well-structured corporate budget. ‘We have maintained interest margins, at acceptable levels effectively countering pressures from a moderately elevated NPL ratio. These results demonstrate the trust placed in us by our extensive and loyal customer base, as well as the strength of our business model, which supports communities both large and small across the country,’ he said.

RDB General Manager/CEO Asanga Tennakoon, highlighted the bank’s robust lending and deposit growth. ‘Our lending portfolio expanded to Rs. 281 billion by end-September 2025, compared with Rs. 244 billion at the close of 2024. Concurrently, deposits increased by Rs. 10 billion during the third quarter, underscoring the confidence customers continue to place in RDB after four decades of service to rural and urban communities alike.’

In a statement RDB said the bank’s total asset base increased to Rs. 354 billion as of 30 September 2025, up from Rs. 324 billion at year-end 2024. RDB maintained a strong capital position with Tier 1 and total capital ratios of 8.59% and 13.61% respectively, remaining within the regulatory requirements. Liquidity indicators also remained robust, with a Liquidity Coverage Ratio (LCR) of 344% and a Net Stable Funding Ratio (NSFR) of 133% as of the reporting date.

Building on its strong momentum, RDB said it remains dedicated to its founding mission of uplifting entrepreneurs at grass root level, supporting SMEs, and enhancing livelihoods in agriculture, fisheries, and micro-enterprise sectors. With an extensive network of 272 service points and a customer base exceeding 7 million, RDB continues to play a pivotal role in promoting inclusive economic growth and expanding financial accessibility across Sri Lanka.

President Anura Kumara Dissanayake has appointed Supreme Court Justice and President’s Counsel Yasantha Kodagoda as Acting Chief Justice.

The appointment was made at the Presidential Secretariat and follows Chief Justice Preethi Padman Surasena’s departure on official overseas travel, the President’s Media Division said.

The Colombo stock market closed on the up for the second straight session yesterday gaining Rs. 147.63 billion in value.

In two sessions the market has regained nearly 40% of the Rs. 424 billion value it lost last week

The ASPI yesterday closed up 2.04% or 439.46 points to 22,034.32 and the active S and P SL20 ended up 1.31% or 77.47 points at 6,004.11.

Turnover was over Rs. 3.88 billion on nearly 105.8 million shares traded and foreign investors were net sellers on a net out flow of Rs. 149.1 million.

First Capital Research said the market took a sharp incline at the beginning of the session and continued to move upward amid minor fluctuations.

Top contributors to the ASPI were DOCK, CINS, COMB, SAMP and ACL. HNW participation were low while retail investors showed a moderate interest.

The Capital Goods sector accounted for 29% of total turnover, while the Materials and Banking sectors contributed a combined 32%.

NDB Securities said High net worth and institutional investor participation was noted in Hatton National Bank, ACL Cables and Tokyo Cement Company.

Mixed interest was observed in Tokyo Cement Company nonvoting, Colombo Dockyard and Laugfs Gas while retail interest was noted in Hikkaduwa Beach Resort, Co-Operative Insurance Company and LOLC Finance.

The Capital Goods sector was the top contributor to the market turnover due to ACL Cables, Colombo Dockyard and Sierra Cables while the sector index gained 2.46%.

ACL Cables gained Rs. 13.25 to close at Rs. 257.25 and Colombo Dockyard moved up by Rs. 34.75 to close at Rs. 174 while Sierra Cables was up Rs. 1.90 at Rs. 33.60.

The Materials sector was the second highest contributor to the market turnover due to Tokyo Cement Company nonvoting while the sector index increased by 1.88%.

Tokyo Cement closed Rs. 2.30 higher at Rs. 82.10. Laugfs Gas was also included amongst the top turnover contributors with the share gaining Rs. 3.10 to close at Rs 63.

Intrepid Travel Asia-Australia Managing Director Natalie Kidd said Sri Lanka must urgently decide the kind of tourism future it wants and embed strong systems of sustainable destination management if it is to protect its natural assets, strengthen competitiveness and fully capitalise on rising global demand.

Kidd, who leads operations for the world’s largest adventure travel company across over 120 destinations, said Sri Lanka already possesses ‘remarkable natural, cultural and human advantages’ that are driving rapid growth for Intrepid.

Delivering the keynote during the ‘Tourism – How can we finally market Sri Lanka as a tourist destination?’ session of the Sri Lanka Economic Summit organised by The Ceylon Chamber of Commerce last week, she noted that Sri Lanka broke into the company’s global top 10 destinations for the first time in 2024, with arrivals doubling that year and growing a further 50% each in 2025 and 2026.

‘Sri Lanka has a diversity of attractions; beautiful landscapes, rich culture and iconic biodiversity and most importantly, warm and welcoming people. With peace and stability, Sri Lanka has much to offer. But now is the time to determine what future Sri Lanka wants for tourism and to learn from examples around the world,’ she said.

Kidd stressed that tourism’s global footprint makes responsible practices essential. With one in 10 workers worldwide earning a livelihood from tourism, she said the industry, when well-managed, can preserve heritage, conserve biodiversity, distribute wealth and foster ‘people-to-people diplomacy’ in an increasingly polarised world.

But she warned that these benefits ‘do not just happen’ and can be quickly reversed when volumes exceed capacity.

Citing global data, she noted that tourism accounts for over 10% of global carbon emissions, while rising anti-tourism protests from Europe to Japan and Indonesia are a reminder of the consequences of unmanaged visitor flows, disrespectful behaviour and infrastructure being diverted away from local needs.

‘These are warning signs that Sri Lanka must learn from,’ she said, adding that strategic tourism planning and destination management are needed to determine appropriate carrying capacities, prioritise quality over unchecked volume and ensure both economic and experiential value.

She said Sri Lanka’s wide product diversity; beaches, culture, wildlife, outdoor adventure and wellness should be seen as a competitive strength, not a branding dilemma.

The variety ‘has something for everyone,’ she said, noting that it enables year-round offerings, geographic dispersal and higher-value segments such as food tourism, family travel and premium experiences.

Emerging global travel trends, she said, further strengthen Sri Lanka’s position. ‘Safety and security remain the top consideration, affordability is second, and the third is sustainability,’ she explained, citing Pacific Asia Travel Association (PATA) data showing travellers are actively avoiding overcrowded destinations and preferring shoulder seasons, alternative cities and authentic cultural experiences.

She said Intrepid’s own research shows that 74% of its customers want meaningful community connections, something Sri Lanka can offer effortlessly.

However, Kidd cautioned that sustainability expectations are now shaping competitiveness. She pointed to data from Europe showing that a third of travellers may change destinations if sustainability standards are lacking. Countries like Trkey and Singapore have adopted Global Sustainable Tourism Council (GSTC) criteria nationally, while investors increasingly require sustainability credentials to unlock grants, concessional financing and technical support.

She stressed that protecting Sri Lanka’s natural and cultural assets, its biodiversity, heritage sites and local traditions must be ‘non-negotiable’.

‘If these are degraded, the industry will suffer long term,’ she warned, raising concerns about waste, water management, ethical wildlife tourism and the strain on historic sites. ‘If the answer to any of these questions is no, it will impact the experience of travellers and the reputation of the destination,’ she pointed out.

Kidd also highlighted the need for greater community inclusion, particularly for women who make most global travel decisions yet occupy less than 10% of visible industry roles in Sri Lanka, and only about 3% of guiding positions.

‘Women have incredible stories to tell,’ she said, noting that tourism involvement expands economic benefits across families and communities.

She said Intrepid has used partnerships to model how sustainability, community empowerment and tourism growth can reinforce each other. Through the Intrepid Foundation, the company works with Zero Plastic Movement to tackle waste and advocate regulatory reform. It also integrates electric vehicles into its supply chain to reduce emissions and partners with the Market Development Facility (MDF) Australia on women-focused training programs.

‘These are examples of how we strive to create positive change through the joy of travel and sustain the destinations that are so important to us,’ she said.

Kidd said to a top panel which featured Sri Lanka Tourism Chairman Buddhika Hewawasam that the time is here to ‘not only plan for the future, but start implementing practical steps.’

‘The Government must guide the direction through regulation and support, while public-private collaboration makes it work. If strong destination management is created as the foundation, marketing becomes clear and value-driven, attracting travellers who will respect and contribute to Sri Lanka,’ she said.

‘Let’s ensure that this island paradise delivers on its promise, by protecting what makes it special and delivering tourism that benefits both the traveller and the people of Sri Lanka,’ Kidd stressed.

The external debt stock reached $ 37,238 million at end-September 2025, rising $ 100 million from the previous quarter, according to the Public Debt Management Office’s latest Quarterly Debt Bulletin.

Although Sri Lanka remains locked out of international capital markets it continues to access and service loans from multilateral agencies such as the World Bank and Asian Development Bank.

Sri Lanka settled $ 1.36 billion in external debt servicing in the first half of 2025, covering 55% of the $ 2.45 billion due for the full year, according to data from the Public Debt Management Office and the Central Bank of Sri Lanka (CBSL). This leaves $ 1.09 billion to be met in the second half of the year.

CBSL Governor Dr. Nandalal Weerasinghe recently said that annual external debt servicing will average around $ 2.75 billion till 2027 under current commitments. From 2028 onwards, it is projected to rise, reaching between $ 3.2 billion and $ 3.5 billion, and peaking at close to $ 4 billion in certain years within the next decade, he said.

According to the 3Q 2025 Debt Bulletin, multilateral lenders account for 37% of the external portfolio, followed by commercial debt at 34% and bilateral debt at 29%. ISBs continue to dominate commercial liabilities, representing roughly 81% of the category, with the balance comprised of syndicated foreign-currency term facilities.

The ADB and the World Bank together make up more than 83% of multilateral exposures.

Among bilateral creditors, 59% of outstanding loans are from non-Paris Club lenders, while 41% originate from Paris Club members.

The bulletin records substantial progress in the external debt restructuring process since the country defaulted its debt in April 2022. On 26 June 2024, Sri Lanka concluded debt treatment agreements with the Official Creditor Committee and separately with the Export-Import Bank of China.

Amendment arrangements were signed to operationalise both sets of agreements. The restructuring of loans from the China Development Bank was completed through amendment agreements on 24 December 2024.

Commercial restructuring proceeded in parallel. An agreement in principle with ISB holders was reached on 19 September 2024, with the subsequent bond exchange finalised on 16 December 2024. Participation reached nearly 98%, enabling almost the entire stock of defaulted ISBs to be converted into new instruments.

Progress with Paris Club creditors continued through 2025. Sri Lanka concluded bilateral amendatory agreements with Japan on 24 March 2025, with the Export-Import Bank of India on 25 March (Lines of Credit) and 3 April (Buyer’s Credit Agreements), and with the Government of France on 16 June. Agreements with EXIM Bank of Hungary on 01 July and the United Kingdom on 22 August brought total completion of restructuring commitments to about 94%

More recently, SriLankan Airlines reached an agreement in principles with external Bondholders holding $ 175 million worth of debt instruments.

With these arrangements in place, the Government has resumed regular debt servicing to the respective creditor partners.

The National Building and Research Organisation (NBRO) yesterday extended its Level-3 (Red) landslide evacuation warning for multiple areas across Kandy, Kegalle, Kurunegala and Matale, with the alert now in force until 4:00 p.m. today.

The highest-level warning requires residents in designated zones to evacuate immediately due to the risk of slope failures triggered by persistent rainfall.

Authorities urged the public to follow evacuation instructions and remain alert to changing ground conditions as saturated soil continues to pose severe landslide risks.

The Bandaranaike Memorial National Foundation, headed by former President Chandrika Bandaranaike Kumaratunga has contributed Rs. 250 million to the Government fund established to support recovery and resettlement of communities affected by recent disasters.

The contribution was handed over by Kumaratunga to Prime Minister Dr. Harini Amarasuriya at the Prime Minister’s Office.

Buddhasasana, Religious, and Cultural Affairs Minister Dr. Hiniduma Sunil Senevi, along with members of the Board of Directors of the Bandaranaike Memorial National Foundation, were also present at the occasion.

Sri Lanka is currently navigating a complex international trade environment shaped by the imposition of new US tariffs on a range of imported goods. These developments have intensified domestic discussions about the potential ‘softening’ of trade terms as the country must simultaneously prepare for possible secondary tariffs on raw materials critical to key export sectors. The challenge for Sri Lanka lies not only in mitigating the immediate economic disruptions caused by these measures but also in leveraging the situation strategically to enhance long-term trade resilience and competitiveness.

Multifaceted strategic leveraging

Strategic leverage in this context requires a multifaceted approach. Strengthening domestic preparedness is essential, including robust institutional frameworks, effective regulatory systems, and enhanced fiscal governance. Clear articulation of trade objectives allows policymakers to prioritise sectors where Sri Lanka can maximise gains while minimising exposure to risks. Adaptive policy measures, guided by a realistic understanding of US policy behavior, judicious use of predictability, and robust domestic readiness, form the essential pillars for navigating future trade negotiations and international economic pressures effectively. By aligning domestic capabilities with global opportunities, Sri Lanka can position itself to respond proactively rather than reactively to shifts in the global trade landscape.

The Organisation for Economic Co-operation and Development’s (OECD) Economic Outlook, Interim Report of September 2025, underscores the duality of the global economy, describing it as navigating a ‘two-way track’ between expansionary impulses and structural constraints. In the United States, targeted investment in artificial intelligence, including the development of data centers and advanced technological infrastructure, has catalysed domestic economic dynamism. In other regions, expansive fiscal policies have mitigated the negative impacts of trade barriers and housing market vulnerabilities. Against this backdrop, the US has imposed tariffs on imports from multiple countries to protect domestic industries and reshape global supply chains, influencing trade flows and introducing uncertainty into international markets. For smaller economies such as Sri Lanka, understanding these developments is crucial to accurately assessing both the risks and opportunities arising from evolving trade dynamics.

In the United States, targeted investment in artificial intelligence has catalysed domestic economic dynamism

While OECD conclusions are primarily informed by the experiences of high-income countries and therefore may not seamlessly translate to the Sri Lankan context, the Organisation remains an invaluable platform for dialogue, analytical insights, and policy benchmarking. Engagement with OECD studies can support strategic modernisation of domestic policies, strengthen fiscal governance, and enhance international credibility. Thoughtful adjustments to tariffs or securing preferential access could facilitate entry into high-growth sectors; however, policymakers must carefully evaluate potential risks, including retaliatory tariffs on essential raw materials. Consequently, trade diversification, adaptive supply chains, and robust macroeconomic planning should serve as the foundation of Sri Lanka’s trade strategy, ensuring it is both opportunistic and resilient, attuned to the bifurcated contours of the contemporary global economy.

Effects of US tariffs

Despite the short-term disruptions and higher costs faced by US consumers, the American economy has remained resilient, supported by robust growth, rising consumer spending, and stable employment trends. Nevertheless, the ripple effects of US tariffs have been significant globally, prompting realignment in import flows, supply chain adjustments, and heightened market uncertainty. While investor sentiment remains generally positive, emerging markets continue to face pressures from changing demand patterns, commodity price fluctuations, and evolving trade policies. For Sri Lanka, these developments present a dual challenge: navigating the risks posed by tariff-induced disruptions while simultaneously seizing new opportunities created by shifts in global trade flows. Government policies should aim to enable informed decision-making by private sector actors, fostering resilient choices that collectively strengthen national economic stability

One such opportunity arises from the potential redirection of trade away from major exporters such as China and India toward smaller economies. US tariffs may create openings for Sri Lanka to expand its exports in sectors such as apparel, tea, and rubber. At the same time, higher costs for imported raw materials could increase domestic production expenses, emphasising the importance of strategic planning and fiscal preparedness. In this context, trade diversification emerges as a critical tool, allowing Sri Lanka to reduce dependency on a limited number of trading partners and enhance resilience against global shocks.

Economic diversification, both in terms of products and markets, is widely recognised as a mechanism for building resilience. Empirical studies indicate that economies with a broader and more varied economic base demonstrate greater flexibility during crises and are better able to absorb sector-specific or nationwide shocks. While specialisation offers efficiency advantages, a balanced approach that promotes both diversification and strategic specialisation enhances long-term resilience without undermining comparative advantages. For Sri Lanka, this translates into the need to emphasise economic diversification at a regional and national level while leveraging smart specialisation in key sectors.

US trade measures present both risks and opportunities for Sri Lanka. By combining strategic trade planning, diversification, strong domestic frameworks, and adherence to international standards, the country can navigate global shocks, seize emerging opportunities, and enhance long-term economic resilience in an increasingly complex and interconnected world

Human capital development, industrialisation, and urbanisation are key factors that influence resilience, with more developed regions often showing higher vulnerability to shocks, while investment in skills and knowledge consistently enhances economic performance. Government policies should therefore aim to enable informed decision-making by private sector actors, fostering resilient choices that collectively strengthen national economic stability.

The need for domestic preparedness for service sector liberalisation

Service sector liberalisation under the General Agreement on Trade in Services (GATS) presents additional considerations. While GATS offers a structured framework for expanding service exports such as IT, tourism, and professional services, unilateral US tariffs introduce uncertainty that may limit market access and diminish the benefits of liberalisation. In this context, strong domestic preparedness, including effective regulatory frameworks and institutional capacity, is essential to ensure that Sri Lanka can respond strategically, protect market opportunities, and maintain credibility with trading partners. By adhering to rules-based frameworks, Sri Lanka can enhance market access, reduce the risk of trade disputes, attract investment, and promote fair competition, all while safeguarding against arbitrary or

discriminatory measures.

Strong domestic preparedness is essential to ensure Sri Lanka can respond strategically, protect market opportunities, and maintain credibility with trading partners

US tariffs also have destabilising effects on both domestic and international markets, reducing cross-country diversification and limiting the ability of firms and consumers to buffer against economic shocks. While these measures increase income volatility and reduce overall economic resilience, they can simultaneously create opportunities for countries like Sri Lanka by redirecting trade flows and incentivising improvements in competitiveness. By strategically adapting to these changes, Sri Lanka can strengthen supply chain quality, improve production processes, comply with international standards, and enhance operational efficiency, supporting both short-term adaptation and long-term economic resilience.

Finally, reports such as the ‘Global Economic Diversification Index 2025’ emphasise the critical importance of diversification, particularly for commodity-dependent economies, to mitigate exposure to price shocks, climate change, pandemics, and geopolitical disruptions. Sri Lanka can leverage digitalisation, value-added manufacturing, services-based economies, and investment in human capital and infrastructure to strengthen resilience, enhance competitiveness, and access new markets. Tariff-induced pressures, while disruptive, can be used strategically to promote long-term sustainable development, alignment with international standards, and achievement of the Sustainable Development Goals, including industrial competitiveness (SDG 8), innovation and resilient infrastructure (SDG 9), responsible production (SDG 12), and economic stability (SDGs 1 and 10).

US tariffs may create openings for Sri Lanka to expand its exports in sectors such as apparel, tea, and rubber

In conclusion, US trade measures present both risks and opportunities for Sri Lanka. By combining strategic trade planning, diversification, strong domestic frameworks, and adherence to international standards, the country can navigate global shocks, seize emerging opportunities, and enhance long-term economic resilience in an increasingly complex and interconnected world.