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Central Bank Governor explains potential impact of US tariffs on Sri Lanka’s economy

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Dr. Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka, shared a detailed analysis of how changes in US trade policies could potentially affect Sri Lanka’s economy.

Responding to questions about the impact of US tariffs at different rates (10%, 20%, 25%), Dr. Weerasinghe provided an in-depth explanation of the current situation.

“We have carried out some studies to gauge the potential impacts, but it’s too early to draw final conclusions. The situation is still developing, and the exact details of US tariffs, including their rates and the countries they will target, remain unclear,” he stated.

He emphasized that Sri Lanka’s export sector, particularly the apparel industry, which generates about $2 billion annually, has a favorable trade balance with the US. However, Sri Lanka’s market access is relatively small when compared to major trading nations such as Mexico, China, and Canada.

Dr. Weerasinghe stressed the need for careful monitoring, suggesting that any effects would largely depend on US policy decisions and whether higher tariffs on specific countries would lead to shifts in trade routes.

“There could be a diversion in trade. Orders may shift to Sri Lanka, or possibly to countries like Bangladesh or Vietnam,” he remarked.

The Governor reassured that the Central Bank is committed to closely following these developments to ensure responsive and well-informed policy decisions. He also highlighted the importance of being flexible in response to global economic challenges.

“Our primary concern is the potential impact on external demand. At the moment, Sri Lanka’s exporters have a full order book for the first half of the year. The critical question will be whether new orders will continue into the second half,” he concluded.

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