Category: Daily Financial Times

A special ceremony to invoke blessings on the Sri Lanka Army and its regimental flags was held at the historic Kataragama Kiri Vehera and Kataragama Devala premises.

The Inland Revenue Department (IRD) has announced a major overhaul of Sri Lanka’s VAT refund system, replacing the Simplified Value Added Tax (SVAT) scheme with a risk-based refund mechanism effective today.

The IRD stated that the new mechanism aims to facilitate faster and more efficient VAT refunds for eligible exporters and projects while reducing opportunities for fraud and errors.

Under the new system, refunds will generally be issued within 45 days of submitting a proper VAT return, depending on the taxpayer’s risk rating. Eligible VAT registrants will be assessed using a statistically robust risk-based methodology and classified into three categories: low, medium, and high risk. Low and medium risk taxpayers can expect refunds without prior verification, while high risk taxpayers will undergo pre-verification before refunds are processed.

According to the IRD, eligible recipients include exporters with direct exports exceeding 50% of their total supply in the preceding year, approved projects under Section 22(7) of the VAT Act, and suppliers to designated Special Projects (SP) and Strategic Development Projects (SDP), where such supplies constitute over 50% of their total supply.

The IRD noted that any non-compliance or errors detected in submitted schedules will pause the 45-day refund timeline until rectification, ensuring accountability in the process.

The SVAT scheme, introduced in 2011, has been a cornerstone of the country’s taxation framework, particularly supporting exporters and strategic projects. However, the move to replace SVAT comes amid growing concerns over VAT compliance and past instances of large-scale fraud.

Notably, Sri Lanka experienced the largest VAT fraud in South Asia in the early 2000s, resulting in a loss of around Rs. 357 million due to unlawful refunds to non-existent companies.

The Government and IRD face a critical challenge in ensuring that the new refund mechanism is robust, transparent and resistant to corruption. With past VAT and income tax refund systems proving vulnerable, policymakers will need to balance efficiency with stringent verification to safeguard public funds.

On 26 September, leading export associations voiced deep concerns and warned of a looming cash flow crisis that could choke the country’s $ 19 billion export target for 2025. At a joint press briefing, representatives from a range of key export industries stressed that while the move is framed as aligning with International Monetary Fund (IMF)-backed reforms, the absence of a tested and functioning VAT refund mechanism threatens to withhold nearly 8% of export earnings or about $ 80 million each month from the sector (https://www.ft.lk/front-page/Exporters-fear—80-m-monthly-cash-crunch-if-SVAT-removed-and-no-refund-system/44-782189).

The Colombo stock exchange closed up yesterday extending a rally into its 11th session with buying interest in capital goods and Blue-chip counters.

The benchmark ASPI closed Tuesday up 0.47%, gaining 102.30 points to 21,778.60. The active S and P SL20 gained 7.32 points to close up 0.12% at 6,126.53.

Turnover was Rs. 6.27 billion on more than 154.7 million shares traded.

Foreigners were net sellers with a net outflow of Rs. 362.2 million, up from an outflow of Rs. 15.6 million the previous day.

First Capital Research said riding the wave of Monday’s bullish surge, the Colombo Bourse yesterday charged ahead once more, fuelled by a powerful rally in Capital Goods and Blue-chip counters.

In the early hours of trading, the market experienced a volatile session marked by notable selling pressure. But the market refused to back down. In a steady and determined climb, it fought its way back, turning red into green.

By the closing bell, the index stood at 21,779, a resounding gain of 102 points, sealing another victorious chapter in its upward march. Participation from HNW investors remained relatively low with moderate participation from retail investors.

Additionally, top positive contributors to the index included, DIMO, BUKI, CCS, MELS and WATA. Turnover for the day stood at Rs. 6.3 billion, reflecting a decrease of 12% compared to the monthly average that stands at around Rs. 7.1 billion.

Food, Beverage, and Tobacco sector took the lead in terms of sector wise contributions to turnover, with a share of 20%, followed by the Consumer services and the Capital Goods sectors which produced a combined contribution of 28%. Foreign investors remained net sellers, recording a net outflow of Rs. 362.2 million.

NDB Securities said high net worth and institutional investor participation was noted in Ceylon Hotels Corporation, Diesel and Motor Engineering, and Central Industries. Mixed interest was observed in Digital Mobility Solutions Lanka, Hatton National Bank and Ceylon Cold Stores whilst retail interest was noted in Kotagala Plantations, Lanka Credit and Business Finance and Browns Investments.

The Food, Beverage, and Tobacco sector was the top contributor to the market turnover (due to Sunshine Holdings) whilst the sector index gained 1.83%. The share price of Sunshine Holdings appreciated by 90 cents to Rs. 32.50.

The Capital Goods sector was the second highest contributor to the market turnover whilst the sector index edged up by 0.02%.

Ceylon Hotels Corporation, Diesel and Motor Engineering, Digital Mobility Solutions Lanka and Hatton National Bank nonvoting were also included amongst the top turnover contributors. The share price of Ceylon Hotels Corporation increased by Rs. 5.40 to Rs. 48.70. The share price of Diesel and Motor Engineering gained Rs. 335.75 to Rs. 2,070.75. The share price of Digital Mobility Solutions Lanka moved up by one Rupee to Rs. 146. The share price of Hatton National Bank nonvoting closed flat at Rs. 297.00.

A new chapter in Sri Lanka’s forest restoration journey begins with a landmark partnership between Alliance Finance Company PLC (AFC) and Preserving Land and Nature (Guarantee) Ltd., (PLANT).

Formalised through a recent MoU, this multi-year collaboration integrates sustainability into AFC’s core products, supports the planting of 100,000 trees across PLANT sites, and initiates community programs near restoration areas. The first engagement unfolds at Radella Estate in Nuwara Eliya, managed by Talawakelle Tea Estates PLC, where AFC will help establish a forest corridor- part of a 13 km stretch being developed by WNPS PLANT with multiple partners.

This initiative unites finance and conservation in a shared mission to restore native forests, enhance climate resilience, and deliver lasting benefits to local communities. AFC will fund the initial phase and aims to scale efforts over five years, combining ecological recovery with community development, nature education, and inclusive financial strategies to create a replicable model for sustainable restoration.

Radella: From degraded grassland to living forest

Radella Estate, bordered by the Nanu Oya stream and dominated by invasive grasslands, is part of PLANT’s Emerald Trails Initiative, an effort to reconnect fragmented habitats in Sri Lanka’s biodiversity-rich southwest. Restoration will focus on planting native pioneer species to stabilise stream banks, improve microclimates, and boost biodiversity. Crucially, the project models how ecological restoration can align with community stewardship and climate adaptation, aiming to link restored areas with the Great Western mountain reserve, home to many threatened species.

PLANT Chairman Sriyan de Silva Wijeyeratne said, ‘This partnership shows what can happen when stewardship replaces sponsorship. Alliance Finance is not just funding a project; they are investing in a living, breathing system. Together, we are bringing forests back, empowering families, and giving communities a tangible stake in nature’s future. AFC is leading the way in demonstrating that sustainability efforts are long term oriented, and they were willing to provide longer term funding solutions for our work, once they understood our vision around Emerald Trails.’

New financial model for sustainability

AFC commit to the UN’s Principles for Responsible Banking, brings more than capital to the table. Through this partnership, AFC is helping shape a new model of conservation- one that integrates environmental regeneration with long-term social and economic resilience. This collaboration reflects AFC’s dedication to Triple Bottom Line values: People, Planet, and Profit. It signals a transition from transactional CSR to embedded sustainability, where financial inclusion and ecological accountability go hand in hand.

AFC Deputy Chairman and Managing Director Romani De Silva said, ‘At Alliance Finance, we believe sustainability means uplifting communities while restoring ecosystems. This partnership reflects our long-term commitment to financing regeneration, not just for nature, but for the people who depend on it. Together with PLANT, we are investing in a future that balances prosperity with planetary well-being. Through this initiative, we also aim to empower the next generation by linking tree planting with financial literacy via our Hapannu Savings Scheme – giving children a chance to grow their savings alongside the trees they help protect.’

Community-centred, locally led

At the heart of PLANT’s mission is the belief that restoration must be community-driven. Across 33 locations, PLANT prioritises native biodiversity and science-based methods while empowering those closest to the land. The organisation is building over 25 km of forest corridors and works with local residents, especially women, youth leaders, and smallholder farmers, to lead restoration efforts. Through community nurseries, training, and income-generating opportunities, PLANT transforms degraded areas into thriving ecosystems. By rooting conservation in local hands, PLANT fosters shared ownership and responsibility, ensuring restored landscapes are protected for generations and that ecological revival goes hand in hand with community resilience.

Beyond Radella: Growing vision

The broader vision is to embed restoration into the cultural and economic fabric of the region. Planned efforts include partnerships with local schools for climate education and student-led planting, digital tools for monitoring tree survival, and community engagement for long-term forest stewardship. By aligning conservation with inclusive development and responsible finance, the AFC-PLANT partnership offers a scalable model for climate-smart restoration in Sri Lanka and beyond. As native saplings take root in Radella, they represent more than reforestation; they symbolise a cross-sector, intergenerational commitment to a future where both forests and communities can thrive together.

President Anura Kumara Disanayake, yesterday met with Nippon Foundation Founding Chairman Yohei Sasakawa at the Imperial Hotel in Tokyo.

The discussion focused on further strengthening the long-standing friendship between Japan and Sri Lanka, the President’s Media Division said.

Sasakawa reiterated his commitment to enhancing livelihoods in Sri Lanka and outlined future plans for the renovation and modernisation of 100 schools in the Northern and Eastern Provinces.

President Disanayake conveyed his gratitude to Sasakawa for his dedicated efforts to advance the development and well-being of the Sri Lankan people and for his longstanding commitment to social service in Sri Lanka.

Sri Lanka could face additional debt service payments of between $ 150 million and $ 270 million a year from 2028 if its economy grows faster than projected, according to the IMF. Payments would continue until 2038 and are capped at around $ 250 million annually.

‘In the case of Sri Lanka, the one-time adjustment nature of the macro-linked bonds presents risks to Sri Lanka as higher payments after 2028, once triggered, would persist even if economic performance were to deteriorate thereafter,’ the IMF said in September 2025 working paper titled ‘Sri Lanka’s Sovereign

Debt Restructuring: Lessons from Complex Processes’.

The extra payments depend on GDP outcomes between 2025 and 2027.

‘Scenarios 1, 2, and 3 are triggered if dollar GDP in 2025-27 exceeds $ 107 billion, $ 99 billion and $ 94 billion, and 2024-27 cumulative real growth exceeds 11.5%,’ the report explained.

Once these thresholds are met, higher payments become permanent for a decade regardless of what happens to growth later.

The IMF noted that State-contingent debt treatments helped address concerns about macroeconomic uncertainties, but designing them prudently was important.

These instruments, known as State-Contingent Debt Instruments (SCDIs), link a country’s payments to its economic performance.

They have been used in Argentina, Greece and Ukraine to bridge differences between debtors and creditors by allowing creditors to trade lower upfront recovery for potential higher future payments.

In Sri Lanka, however, SCDIs constituted a core part of creditors’ recovery and prolonged the negotiations due to their complexity.

‘They can introduce political complications in the future in case higher payments are triggered but are not socially accepted’ the Staff Report said.

While the Fund does not get involved in the details of the instruments’ design in specific cases (this is an issue for the authorities, their creditors, and respective legal and financial advisers), the Fund needs to assess the impact of these instruments on program goals, i.e., the restoration of macroeconomic and debt sustainability,’ it added.

The IMF does not design these instruments itself but stressed it must evaluate their impact on debt sustainability.

This includes assessing whether the extra payments make it more likely that debt targets are breached, whether different groups of creditors are treated fairly, and whether design risks such as uncapped exposures or poorly chosen triggers could undermine repayment capacity.

The Fund explained that these assessments involve ‘complex modelling under the SRDSF framework, which informs the extent to which upside risks can be shared with creditors without compromising debt sustainability.’

The SRDSF, or Sovereign Risk and Debt Sustainability Framework, uses fan charts based on past economic data to simulate thousands of possible outcomes for debt and financing needs.

The IMF then tests whether adding the SCDIs would increase the probability of crossing debt safety thresholds, worsen debt in bad economic scenarios, or create excessive risks in extreme cases.

According to the IMF, Sri Lanka’s arrangement met these conditions. The probability of breaching debt-to-GDP and gross financing needs targets was within acceptable limits.

In scenarios where financing needs were already too high, the SCDIs did not make them worse compared to standard bonds.

The report also noted that ‘the 90th percentile contributions to average GFNs were below 0.4% of GDP,’ meaning even in the most adverse 10% of outcomes, the additional burden was still relatively small. Payments were also capped at $ 250 million per year.

Even so, the Fund cautioned that ‘some risks remain as no methodology can perfectly capture such complex uncertainties.’

Sri Lanka took a significant step forward in advancing the conversation on responsible business practices with the convening of the high-level roundtable on living wage, held on 24 September 2025 at Galle Face Hotel, Colombo.

Organised by the UN Global Compact Network Sri Lanka (Network Sri Lanka) in collaboration with the International Labour Organisation (ILO Sri Lanka), the event was hosted as A. Baur and Co.’s nationally significant event in its role as patron of the Business and Human Rights Working Group of Network Sri Lanka.

Taking place against the backdrop of the ILO’s High-Level Regional Dialogue on ‘Shaping the Living Wage Agenda in Asia and the Pacific’ in Colombo, the roundtable brought together C-Suite executives and senior business leaders from across Sri Lanka for a closed-door dialogue on the future of living wage in the corporate landscape. The session created a space to exchange ideas, reflections, and perspectives on one of the most pressing challenges for sustainable business and social equity.

Global-local dialogue

The keynote address was delivered by International Organisation of Employers (IOE)Director of Policy – Industrial Relations and ILO Coordination Luis Rodrigo Morales-Velez, who spotlighted the global significance of operationalising living wage frameworks while highlighting the critical role of the private sector in advancing fair and equitable work conditions, while stressing that this effort must go hand in hand with Government responsibility to provide an enabling environment through sound labour market policies, effective regulation, and support for enterprise development. His remarks set the tone for the discussions that followed, bridging global labour standards with the Sri Lankan corporate context.

The roundtable was also joined by ILO specialists Anoop Satpathy, Wage Specialist, Nicolas Maitre, Economist and Ravi Peiris, Senior Employer Specialist who presented key elements of the ILO conclusions on Wage Policies including living wages and contributed to the discussion relating to its advancement of living wages in the context of Sri Lanka. It was mentioned that there is no ‘one size fits all’ approach in aspiring towards this objective. Sri Lanka can take note of their current practices in collective bargaining and wage and benefit fixation and move towards promoting ‘living incomes’ which will also include wages along with other benefits that support workers’ living standards.

The roundtable was further framed within the context of the ILO’s regional deliberations on decent work and labour standards, spotlighting the global importance of fair and equitable wage practices. At the same time, it was designed to capture the Sri Lankan perspective, reflecting on the country’s evolving economic conditions, workforce realities, and the growing recognition that the private sector has a pivotal role to play in creating a more just and inclusive economy. For Network Sri Lanka, convening this dialogue marked a milestone in advancing the Ten Principles of the UN Global Compact, particularly those related to human rights, labour, and equality. It also aligned with the UN Global Compact’s Forward Faster initiative, which calls on businesses worldwide to accelerate progress toward the Sustainable Development Goals (SDGs) by 2030, including ensuring that all employees earn a living wage.

Significance of living wage

A living wage goes beyond statutory minimum requirements, ensuring that workers and their families can afford a decent standard of living. This includes access to housing, food, healthcare, education, and the ability to participate meaningfully in society. With rising costs of living and increasing demands on workers across industries, the Living Wage conversation has become a central pillar of global sustainability and human rights frameworks.

By situating the roundtable at the intersection of business imperatives and social responsibility, the meeting highlighted the strategic and ethical importance of embedding living wage principles in corporate strategies. For Sri Lankan companies, this approach not only supports workforce wellbeing and retention but also contributes to supply chain resilience, competitiveness, and long-term sustainable growth.

Hosting as nationally significant event

The event was hosted as A. Baur and Co.’s nationally significant event, reflecting the company’s leadership and commitment to responsible business practices. As Patron of the Business and Human Rights Working Group of Network Sri Lanka, A. Baur and Co. continues to play a catalytic role in advancing conversations that bridge corporate responsibility with national development priorities.

Platform for responsible leadership

By design, the roundtable encouraged peer-level exchange and reflection, with the understanding that business leaders play a decisive role in shaping workplace policies, influencing supply chains, and setting the tone for responsible business conduct. The participation of the ILO and Network Sri Lanka provided additional context and expertise, ensuring that the dialogue was grounded in both global frameworks and local realities.

Advancing forward faster

The roundtable is part of Network Sri Lanka’s broader efforts to support companies in contributing meaningfully to the 2030 Agenda for Sustainable Development. Through its Working Groups, leadership dialogues, and collaborative initiatives, Network Sri Lanka is enabling the private sector to take measurable steps on issues ranging from human rights and labour to climate action, supply chains, and gender equality.

John Keells CG Auto (JKCG) yesterday issued a further update to its customers and stakeholders on the ongoing proceedings before the Court of Appeal regarding certain consignments of BYD vehicles detained by Sri Lanka Customs and other related developments.

The company’s full statement reads as follows:

While we have sought interim relief from the Courts to obtain the release of our electric vehicles (EV), we continue to engage with the Sri Lanka Customs to clear shipments of the remaining vehicles which continue to be unjustly detained.

In the meanwhile, as reported in the media, Sri Lanka Customs has appointed a Committee of its own accord. It is our understanding that this Committee is expected to consider some technical matters belatedly raised by Sri Lanka Customs. We have consistently maintained, and indicated, our willingness to subject the select vehicle models to testing at an independent, internationally accredited motor laboratory which will help ascertain and clear any concerns regarding the output of the motor capacity of the vehicles. This will ensure accuracy, credibility and consistency, and we have already intimated this suggestion to Sri Lanka Customs, during and outside of Court proceedings. We have, in the spirit of co-operation, provided all the necessary information received by us from the Manufacturer to that Committee, and we intend to continue to do so. We remain mindful of the need for the Committee’s deliberations to be conducted with impartiality and transparency, which we consider essential to maintaining a cooperative and fair engagement, notwithstanding our position that its findings are not binding given our position that independent test verification is the clearest manner to resolve any uncertainty. In any event, the globally accepted norm is to rely on the Manufacturer’s Certificate for vehicle clearance which has not been applied to BYD electric vehicles.

While we continue to engage with the authorities, the resolution of this matter taking longer than expected has resulted in our inability to commit to a confirmed delivery timeline for our electric vehicle (EV) models, at this moment. This has necessitated us to offer alternate options to our valued customers who have placed their trust in JKCG and have been patient, and understanding, having appreciated the extenuating circumstances. We have directly contacted all affected customers and continue to engage with them. Customers who made bookings for EVs prior to 11 September 2025 have been offered three options to: (1) switch to a BYD SEALION 5 with a special discount; (2) receive a refund with interest (if confirmed by 10 October 2025); or (3) retain their original booking until Customs determination or litigation proceedings are completed.

We wish to clarify that customers can still place orders for EVs, subject to the uncertain outcome of delivery based on our engagement with the authorities. Considering the uncertainty of delivery and so as to not burden our customers, we will not require payment advances for Electric Vehicle (EV) bookings at this juncture.

We wish to assure our customers that all importation and deliveries of BYD Plug-in Hybrid Electric Vehicles (PHEVs) remain unaffected and will continue as scheduled. We further wish to reiterate and assure our existing valued EV and Plug-in Hybrid customers, that warranties, spare parts, and related services remain fully supported by BYD and JKCG.

As we believe that a fair and level playing field for all vehicle importers is essential to achieving the broader vision of rapid transition to sustainable mobility in the country, JKCG will continue its investments in charging infrastructure, expansion of our showroom network, after-sales service and capacity building. The recently opened showroom in Moratuwa and our new service facility with the new Wattala Service Centre demonstrates our commitment to support the continued growth of the EV footprint in Sri Lanka.

As stated previously, we have extended our full cooperation to all relevant authorities and provided the manufacturer’s specifications and compliance documentation, which are accepted globally, as the authorised distributor for BYD in Sri Lanka. We reiterate our commitment to compliance, and complete transparency with which we have approached this matter from the outset. We wish to thank all our stakeholders and, particularly, our customers for their loyalty, trust and continued understanding and support.

The Tourism Ministry and Sri Lanka Tourism Promotion Bureau (SLTPB) yesterday set the record straight amid recent debates over LGBTQ-themed events, noting Sri Lanka values diversity and respects all communities, whilst stressing that the Government has not launched specific tourism campaigns targeting LGBTQ+ travellers.

In a joint statement, they said that tourism promotion will continue to focus on the country’s cultural heritage, natural beauty, wellness and adventure experiences, reflecting Sri Lanka’s commitment to inclusivity, dignity and social harmony.

Following is the full statement.

‘The Tourism Ministry wishes to address the recent public discourse surrounding the Sri Lanka Tourism Promotion Bureau’s (SLTPB) communication regarding LGBTQ-themed events. We recognise the diversity of our society and affirm that every community, including the LGBTQ community, is a valued and respected part of it.

Sri Lanka has long been a welcoming destination for travellers from all walks of life. Our tourism legacy is built on the warmth of our people, the richness of our culture, and the breath-taking beauty of our landscapes. We remain committed to promoting inclusivity, mutual respect, and hospitality for all visitors, regardless of background.

The Government is committed to ensuring equality for every Sri Lankan citizen and foreign tourist, regardless of their ethnicity, religion, age, gender, sex, or sexual orientation, as enshrined in Article 12 of the Constitution and affirmed by the determinations of the Supreme Court of Sri Lanka. These principles guide our approach to tourism and public engagement, ensuring that Sri Lanka remains a destination that reflects dignity, fairness, and respect for all.

However, the Government has not decided to run a specific tourism promotion campaign targeting LGBTQ+ foreign tourists. While such proposals among others have been presented for consideration, they are part of broader discussions aimed at reinforcing Sri Lanka’s image as a safe and welcoming destination for all travellers. Any future initiatives will be carefully evaluated within the framework of national tourism priorities and social harmony.

Sri Lanka is a country that respects all genders and communities, along with their individual identities. This respect, however, should not be misinterpreted as an endorsement or promotion of any particular sexual behaviours or activities. Our intention is to create space for individuals-should they choose-to engage with globally recognised institutions and platforms where they can express their perspectives freely and safely.

As a civilized society, it is essential that we approach such matters with maturity and understanding. No citizen or visitor should be judged or measured based on their gender identity or orientation. Our strength as a nation lies in our ability to uphold dignity, fairness, and mutual respect for all.’

According to the statement issued by the Sri Lanka Tourism Development Authority Chairman, this reflects one of many outreach efforts aimed at engaging global audiences, it does not signal a change in the Government’s core tourism strategy. ‘Our national approach continues to prioritise Sri Lanka’s unique cultural heritage, wellness and nature-based experiences, adventure tourism, and spiritual journeys-elements that have consistently positioned our country as one of the world’s most cherished travel destinations,’ he stated.

We acknowledge that the topic has generated concern among certain segments of society. As a Government, we are mindful of the sensitivities involved and wish to reassure the public that our tourism promotion remains rooted in unity, tradition, and the shared values that define Sri Lankan society. We believe in celebrating the full spectrum of Sri Lankan identity while ensuring that tourism continues to be a source of pride and prosperity for all citizens.

We respectfully call upon all stakeholders, including political and religious leaders, civil society, and the general public, to approach this matter with understanding and calm. Let us work together to present Sri Lanka to the world as a destination of warmth, diversity, and timeless appeal-one that reflects the true spirit of our people.’

Mahindra Ideal Finance Ltd. (MIFL), has further expanded its island-wide presence with the opening of a new branch in Gampola on 18 September 2025. This marks the company’s 37th branch and reflects its continued commitment to improving access to financial services across the Central Province and beyond.

MIFL’s Managing Director and Chief Executive Officer Mufaddal Choonia, led the opening ceremony, together with members of the company’s senior management and branch staff. The new branch offers a full portfolio of services, including multi-brand vehicle leasing, business and SME loans, revolving loans, gold loans and fixed deposits, aimed at supporting both individual and business customers in the area.

‘Our expansion into Gampola is part of a broader effort to bring customised, transparent and flexible financial solutions closer to where our customers live and work. We believe every Sri Lankan should have access to tools that help them build a better future for themselves, regardless of geography,’ Mufaddal said.

The Gampola branch adds to MIFL’s growing regional network, which plays a central role in the company’s strategy to extend responsible and technology-enabled finance to emerging communities in Sri Lanka. In recent months, MIFL has introduced several new initiatives, including tailored financial solutions for MSMEs and multi-brand vehicle importers, supported by strategic partnerships and financial product innovation.