Category: Daily Financial Times

The NPP Government’s second Budget was a unique opportunity to make innovative public policy. Sadly, the opportunity may be missed. But there still is time.

The Public Financial Management Act (PFMA), No. 44 of 2024, which extends the revenue and expenditure limits of 15.3% and 13% of GDP, respectively, beyond the duration of the Extended Fund Facility constitutes a disciplinary framework. Our Budget makers are not used to this kind of discipline. But such limits will keep us safe from the pain of a second default. Embracing them can also unleash our creativity.

The options of walking away from the IMF agreement, as President Gotabaya did in 2019, and rescinding or amending the PFMA, for which the NPP has the votes, exist. But in our current circumstances the price that would have to be paid for either action would be excessive.

The problem

It is broadly accepted that the people of this country paid a high price for the economic recovery. The micro and small enterprises that went out of business have not come back. The near-poor who got thrown into poverty are still below the poverty line.

Those whose professions allowed them to increase their incomes, ranging from doctors in private practice to plumbers, have done so. But the lost purchasing power of estate workers and Government employees has not yet been regained.

Given the difficulties of increasing salaries (as demonstrated by the convoluted mess which is the solution proposed for the problem of estate workers), the optimal solution would seem to be that of reducing the cost of living. Reducing the VAT rate appears an attractive solution but is impractical. When the ill-advised Viyath Maga tax cuts brought down the VAT rate from 15% to 8% in 2019, consumer prices did not decline

Similarly, it is unlikely that a reduction in the rate from 18% to 15% now will yield lower retail prices.

So, what can the Government do to ease the pain of the people of this country as the economic recovery gains momentum?

The solution

The Government derives most of its revenue from taxes on imports (40%). Revenue from taxes on domestic trade (primarily VAT) yields 32% and is likely to increase because the Government intends to lower the threshold from Rs. 60 million to Rs. 36 million. Personal and corporate income taxes yielded only 21% of total revenues. Non-tax revenues yielded only 7%.

It is well understood by all, including the President himself and the Secretary of Treasury, that para tariffs, which are a major component of taxes on imports, must be phased out. As stated in the Budget speech: ‘ . . . with the aim of boosting economic growth by increasing the competitiveness of external trade, we expect the gradual phase out of para-tariffs . . ‘

Most, if not all, of Sri Lanka’s exports require some inputs that are imported. When those inputs are subject to para tariffs such as the Port and Airport Levy, the competitiveness of the exports is necessarily diminished.

The para tariffs (and the revenues they currently yield; and the projections) that must be phased out are given in Table 2.

All of them directly impact ordinary people. For example, the SCL causes potatoes to be more expensive by Rs. 50-70 per kilo. Phasing out the PAL and the Import CESS will lower the costs of food and of the inputs that go into exports. Lowering para tariffs will do more to provide affordable housing for young people than the convoluted and under-resourced proposals to increase the country’s housing stock contained in the Budget proposals.

Start now

Currently, the Government’s praiseworthy statements about phasing out para tariffs are contradicted by the ever-increasing revenue yields projected by the Treasury (shown in Table 2 above). ‘Progressive elimination’ promised by the Secretary to Treasury must be reflected in decreasing yields from each of the anti-growth para tariffs.

Instead of general statements with no timelines, what is needed is a specific schedule for the phasing out of these counter-productive taxes with reductions starting now. If that process is started with this Budget, the people will gain relief. One of the biggest barriers to effective participation by Sri Lankan enterprises in global production networks will be removed. We may at least have a chance of achieving the 7% growth the President likes to talk about.

Eng. Ravi Rupasinghe has been appointed as the General Secretary of the Organisation of Professional Associations of Sri Lanka (OPA) for the 2025/2026 term.

He has been an active contributor to the OPA for over a decade, serving on the Executive Council since 2014 and completing five consecutive terms as Vice President since 2018. He has also chaired several key committees, including the Career Guidance and Skills Development Committee for three years, and the Education and Human Resources Development Committee.

A professionally qualified Chartered Electrical Engineer with over 25 years of industry experience, Eng. Rupasinghe brings to this key position a distinguished record in engineering consultancy, corporate leadership, and service to the professional community.

He holds a Bachelor of Science degree in Electrical Engineering and a Master of Business Administration in Management of Technology (MBA-MOT) from the University of Moratuwa.

As a leading entrepreneur, Eng. Rupasinghe has been instrumental in driving innovation and contributing to Sri Lanka’s economic progress.

He serves as the Chairman and Managing Director of Aklan International Ltd., Multi-Tec Technologies Ltd., Quantum College Ltd., and Zeity by RR Ltd., ventures that promote technological advancement, engineering excellence, and education.

He has also collaborated with numerous multinational and local organisations, including Ceylon Oxygen Ltd., Loadstar Ltd., UNIDO project on Accelerating Industrial Climate Responses in Sri Lanka, initiatives promoting the Eco-Industrial Parks concept with NCPCSL and the Ministry of Industries, and the ‘Future Minds Advancing Science Curriculum for National Prosperity’ project of SLAAS.

Eng. Rupasinghe’s extensive record of professional service includes serving as President of the Engineers’ Guild of Sri Lanka (EGSL) for three years, Vice Chairman of the Ceylon National Chamber of Industries (CNCI) where he also chaired the Achiever Awards Committee, and Vice Chairman of the Institution of Engineering and Technology (IET-UK) Sri Lanka Network. He is also a member of the Institution of Engineers Sri Lanka (IESL), and a Board Member of the Sri Lanka Energy Managers Association (SLEMA).

In his new capacity, Eng. Rupasinghe will oversee the OPA’s secretariat operations, coordinate collaboration among affiliated member bodies, drive key policy initiatives, and represent the OPA at national and international forums.

Founded in 1975, the Organisation of Professional Associations of Sri Lanka serves as the apex body for 52 professional associations, representing 34 professions and a membership exceeding 60,000 professionals.

The Ceylon Federation of MSME President Mahendra Perera yesterday criticised the 2026 Budget for failing to provide relief to struggling micro, small and medium enterprises (MSMEs), and warning that the reduction of the VAT threshold and lack of credit access could further strain both enterprises and consumers.

Perera said while the Government had introduced several new loan schemes for MSMEs, there was no meaningful support for businesses that have suffered losses over the past five years.

‘The issue is that there’s no relief for the affected businesses and no mechanism to obtain new loans for those already in non-performing loan (NPL) status,’ he told the Daily FT.

He stressed that many MSMEs continue to face liquidity challenges.

Perera said that the Federation plans to highlight these concerns through the media and at Ministry level in the coming days, urging authorities to establish a practical mechanism that enables genuinely affected MSMEs to regain access to capital.

He also raised concern over the Government’s decision to reduce the VAT registration threshold from Rs. 60 million to Rs. 36 million, effective April 2026, warning that it would push more small retailers into the tax net and pass an 18% VAT burden on to end consumers.

‘This will be another major blow to people already struggling with day-to-day difficulties,’ Perera cautioned.

FitsAir recently hosted the Galaxy Awards 2025, an evening dedicated to celebrating its top-performing and emerging travel agents for their remarkable achievements, commitment, and partnership.

Held in line with the airline’s third-year anniversary, the event brought together key travel partners and industry representatives, highlighting the strong relationships that drive FitsAir’s success and reaffirming its commitment to delivering affordable, on-time, and hassle-free travel experiences across its growing network.

Total private sector borrowings in September spiked to a record Rs. 236.3 billion, resulting in the total outstanding amount reaching Rs. 9.52 trillion, up 22.1% from a year ago.

This is the highest monthly private sector borrowing after Rs. 227 billion in August followed by Rs. 221 billion in June.

According to the latest Central Bank of Sri Lanka (CBSL) data, domestic banking sector credit to the private sector in September amounted to Rs. 247.1 billion, while credit from foreign banks fell by Rs. 10.8 billion.

The outstanding private sector debt stock from domestic banks during the first nine months of 2025 was Rs. 8.93 trillion, up 23.6% from a year ago.

Outstanding credit stock to the Government grew 3.3% year-on-year (YoY) to Rs. 8.28 trillion as of end-September, with credit from domestic banks up 4.9% YoY to Rs. 6.4 trillion. Total credit to public corporations was down 7.4% YoY to Rs. 608 billion, with the domestic banking sector debt stock at Rs. 555.6 billion, down 8.5% from a year ago.

Ambassador of Sri Lanka to the Kingdom of Saudi Arabia, Ameer Ajwad, met with Minister of Transport and Logistics Services of Saudi Arabia, Eng. Saleh bin Nasser bin Alali Aljasser, for a productive discussion on enhancing cooperation in the fields of maritime, ports, and aviation between the two countries. Both sides explored avenues to strengthen multilateral engagement in the international maritime domain and deepen bilateral collaboration in aviation, shipping, and port development. The discussions included the prospect of a bilateral agreement on mutual recognition of qualification certificates for seafarers.

PMF Finance PLC has appointed Nalin Warnakula to its Board as an Independent Non-Executive Director.

Warnakula is the Chief Financial Officer of Sterling Automobiles Lanka Ltd. He is a dynamic and results-oriented executive with over 22 years of vast experience in different industries such as Automobiles, Apparel, Trading, Logistics, Leisure, Medical, and Packaging.

His proven expertise in strategic planning, financial management and corporate governance has driven many corporates to a sustainable business growth.

He is a Fellow member of Institute of Chartered Accountants of Sri Lanka and also a Fellow member of Association of Business Executive of United Kingdom. He holds an MBA in Australian Institute of Business, Adelaide, Australia and a BSc. Business Administration (Finance Special) Degree in University of Sri Jayewardenepura.

Having completed his training at KPMG Sri Lanka, he started his career as Head of Finance and General Manager – Finance of Lidechsi Group. He then transitioned to the Apparel sector as Chief Financial Officer at GC Lanka Clothing Ltd.

Thereafter he continued his career growth, becoming Group Finance Manager of MRC Group of Companies.

Archbishop of Colombo Malcolm Cardinal Ranjith has raised alarm over what he described as an ‘inappropriate sexual education program’ being developed for inclusion in the country’s school curriculum next year, warning that it threatens to erode Sri Lanka’s cultural and moral values.

Speaking at the reopening ceremony of the renovated St. Stephen’s Church in Meerigama-Kinadeniya on Saturday, Cardinal Ranjith criticised the proposed education reforms scheduled to begin in January 2026, alleging that the sexual education component is being introduced under the influence of international organisations.

He claimed that the new curriculum seeks to introduce lessons on sexual education from Grade 6, supported by teacher training and seminars, and questioned the Government’s intentions behind the move.

‘Is this really education? Isn’t it the parents’ responsibility to teach such matters to their children at the right time?’ he asked.

The Cardinal further alleged that the program includes content on same-sex relationships and birth control, and accused foreign entities such as the United Nations Population Fund (UNFPA) of funding and guiding the initiative.

‘They have given money to the government and the Education Ministry, printed books, and are now implementing a plan that misleads our children,’ he said.

Warning that the program is expected to commence on 27 January, he said it could undermine Sri Lanka’s cultural and religious foundations.

‘This is an attempt to destroy our children. They are trying to bring the values of a decayed Western world that has lost religion and morality into our country,’ he cautioned.

The Cardinal urged the Government and the President to intervene immediately and halt the implementation of the proposed lessons.

‘If the Ministry of Education is acting in ways that lead innocent children astray, we must completely reject it,’ he said, reiterating his objection to the initiative.

The Central Bank of Sri Lanka (CBSL) has tightened credit conditions for vehicle financing by reducing the maximum loan-to-value (LTV) ratios that banks and finance companies can offer, effective 8 November 2025.

Under the new Directions No. 03 of 2025 issued by Governor Dr. Nandalal Weerasinghe, the LTV ratio for commercial vehicles has been reduced to 70% from 80%, while the ratio for motor cars, vans, and SUVs has been cut to 50% from 60%.

Three-wheelers remain capped at 50%, while credit for any other vehicle types has been lowered to 50% from 70%.

The new framework applies to all Licensed Commercial Banks, Licensed Specialised Banks, Licensed Finance Companies (LFCs), and Registered Finance Leasing Establishments (RFLEs). It replaces CBSL Act Directions No. 02 of 2025.

Transitional provisions will apply to vehicles imported under Letters of Credit (LCs) opened before the new rules take effect. Cars imported under LCs opened between 18 July and 8 November 2025 will still qualify for the previous, higher ratios of up to 80% for commercial vehicles and 60% for passenger vehicles.

For LCs opened before 18 July 2025, the earlier transition provisions continue, which allowed up to 90% financing for electric vehicles and higher ratios for certain categories.

The CBSL said the new limits are part of its macro-prudential measures to ensure prudent lending and manage credit growth in the vehicle financing sector. The updated rules require financial institutions to use verified market valuations from authorised agents or professional valuers when determining the loanable value of a vehicle.

The external sector registered a current account deficit in September 2025 for the first time this year on surging vehicle imports. The CBSL said that vehicle imports, comprising both personal and commercial vehicles, totalled $ 286 million in September, leading to total vehicle imports of $ 1.2 billion in the first nine months of the year.

Governor Weerasinghe in October said the CBSL has revised the vehicle import forecast from $ 1.2 billion to $ 1.5 billion for 2025.

According to the CBSL Financial Stability Review released in October 2025, vehicle loans accounted for over 63% of loans of the finance company sector.

Sri Lanka marks National Science Day 2025 this week, aligning with UNESCO’s World Science Day for Peace and Development, reaffirming its commitment to advancing science, technology, and innovation (STI) for sustainable growth.