Thanushka Jayasundara, Group Chief Financial Officer at JXG (Janashakthi Group), examines the role of financial leadership and proactive management in determining success amidst global economic uncertainties to build resilient investment strategies, promote financial inclusion, and drive sustainable growth.
Which global economic trends currently pose challenges and opportunities for financial institutions like JXG?
One of the most significant and complex trends reshaping the global economic landscape is the rise of protectionist trade policies, particularly those led by the U.S. through new tariff regimes and industrial policy shifts. These measures, intended to address fiscal and trade imbalances, have contributed to geopolitical tensions, disrupted global supply chains, and altered longstanding trade alliances. This evolving environment injects volatility into global interest rates and commodity prices, which affects emerging markets like Sri Lanka through changes in trade balances, exchange rates, and capital flows.
Another structural trend is the gradual shift in global reserve currency dynamics. According to the IMF, the U.S. dollar still accounts for over 58% of allocated global foreign exchange reserves. However, central banks are increasingly exploring diversification strategies, especially considering geopolitical risks and sanctioned regimes. This movement could alter global reserve composition over time, impacting currency stability and cross-border capital allocations.
For Sri Lanka, these global developments influence local interest rates through the trade and capital accounts. If the U.S. Federal Reserve or European Central Bank begin loosening monetary policy, as the ECB has already signalled, it could lower global interest rates. However, any supply-side inflation from trade disruptions could temper this easing. Locally, the Central Bank of Sri Lanka may let the currency depreciate moderately to boost export competitiveness while maintaining the current monetary policy stance, which encourages credit flow to the private sector. This is possible because Sri Lanka is currently recording negative inflation rates.
In this environment of global and domestic volatility, interest rate risk management becomes our biggest challenge and our greatest opportunity. At JXG, our ability to balance risk and return amid interest rate fluctuations is critical. Institutions that can effectively navigate this uncertainty by actively managing duration gaps, diversifying funding sources, and capitalizing on volatility in fixed-income markets are well-positioned to outperform.
What trends will be relevant to the growth of JXG and the Sri Lankan market?
Sri Lanka is approaching a critical economic inflection point. According to the 2023 annual report of the Sri Lanka Labour Force Survey, the country faces a decline in population and labour force growth, with a significant portion of the population now over the age of 45. This demographic shift will increase the dependency ratio, placing long-term pressure on public services, pensions, and overall economic productivity.
To counter this, Sri Lanka must invest heavily in human capital, technology, and productivity enhancements. If successful, the country could follow a trajectory similar to high-income, low-population economies like Finland or New Zealand, where growth is driven not by scale but by efficiency and innovation. For JXG, this opens strategic opportunities in sectors including health insurance, retirement planning, fund management, and SME financing. All of these factors will be critical in a rapidly ageing society.
Domestically, persistently high borrowing costs continue to hamper the global competitiveness of Sri Lankan businesses. Financial institutions must play a catalytic role by enabling access to affordable capital. This could take the form of improved risk-based pricing, alternative credit assessment models, and partnerships that lower operational and funding costs.
At the same time, global investors navigating heightened trade tensions are increasingly seeking out emerging markets that demonstrate macroeconomic stability and consistent policy frameworks. If Sri Lanka can maintain its fiscal discipline, strengthen its external buffers, and build investor confidence, it will become a more attractive destination for long-term capital. The Central Bank’s recent efforts to address macro risks and stabilize the currency are positive signals.
For JXG, future growth will depend on our ability to respond to these structural shifts, adjust pricing strategies, embrace digital transformation, and develop financial solutions aligned with domestic recovery and regional integration.
What role does technology play in enhancing financial resilience?
Technology is a critical lever in Sri Lanka’s path toward higher value creation and financial resilience. Economic expansion can no longer rely on scale as the country approaches a demographic turning point with an ageing population and slowing labour force growth. Instead, Sri Lanka must transition to a model driven by productivity, innovation, and efficiency, where technology plays a central role.
Breaking free from the middle-income trap will require widespread digital literacy across households, financial institutions, and regulatory bodies. Yet, this transformation faces headwinds, including heavy taxation on financial services, high operating costs, and a limited pool of advanced tech talent that continues to inhibit meaningful investment in innovation.
Despite these constraints, the opportunity is profound. Underutilized technologies such as process automation and blockchain have the potential to significantly reduce transaction costs, improve credit and risk assessment, and extend financial services to previously excluded populations. For institutions like JXG, deploying these technologies translates directly into operational resilience, better risk-adjusted returns, and the ability to deliver tailored products at scale.
Importantly, as Sri Lanka seeks to raise its per capita GDP, technology is the bridge that enables fewer people to generate more economic output, following models like Finland, Singapore or Denmark. A more tech-enabled financial system not only increases institutional competitiveness but also supports the broader economic objective: to shift from a low-cost, labour-dependent economy to one based on higher value-added services, human capital, and digital capability.
By strategically investing in technology, JXG can play a pivotal role in this transition by supporting inclusive growth, enabling productive investment, and helping build a resilient financial sector that thrives in a dynamic global environment.
How could financial institutions navigate uncertainties and build resilience?
Financial resilience in today’s environment begins with forward-thinking leadership. Institutions must cultivate a strategic mindset that prioritizes anticipation and not reaction, actively identifying emerging risks, geopolitical shifts, and macroeconomic volatility before they impact the balance sheet. In this context, resilience is less about weathering storms and more about positioning to thrive through them.
A foundational element of this is robust asset-liability management (ALM). Maintaining balance sheet stability across interest rate and credit cycles requires the proactive use of tools such as interest rate swaps, liquidity buffers, and capital stress frameworks. Regular and rigorous stress testing should not be a compliance exercise but a central strategic planning and resource allocation component.
Beyond technical tools, resilience is also cultural. Institutions must embed a risk-aware ethos at every level, from frontline staff to board oversight. This includes aligning key performance indicators (KPIs) and incentive structures with risk-adjusted returns rather than short-term profitability. Doing so mitigates overexposure to volatile assets or markets and reinforces sustainable value creation.
Financial institutions must build agility into their governance, analytics, and crisis response frameworks in an era where the gaps between economic shocks are narrowing, driven by instantaneous information flows, market interconnectedness, and climate-related risks. The ability to pivot rapidly, backed by real-time data and scenario planning, is no longer optional—it’s essential.
What considerations should investors make when seeking sustainable returns in the current global economic climate?
Investors prioritize stability, resilience, and long-term value creation in today’s uncertain global environment. Sri Lanka’s ongoing macroeconomic correction has rekindled interest from long-term investors, but capital commitment now depends on far more than growth potential and hinges on predictability, risk-adjusted returns, and strategic foresight.
Sustainable investment is underpinned by three pillars: strong and consistent returns, robust risk management, and governance. Investors are increasingly drawn to businesses that demonstrate agility, forward-thinking leadership, and clear alignment with Environmental, Social, and Governance (ESG) principles. These attributes are no longer differentiators—they are baseline expectations.
In this climate, investors are looking for clear exit horizons, typically within 5 to 10 years, returns denominated in stable foreign currencies to hedge against local currency depreciation, and business models tailored to demographic trends, operational efficiency, and market relevance.
However, Sri Lanka’s CCC+ sovereign credit rating imposes significant constraints. It limits access to global capital markets and deters regulated institutional investors from deploying capital at scale. As a result, investor due diligence now extends beyond individual company metrics to include country-level risks. Fiscal discipline, monetary stability, and governance quality are under scrutiny.
Sri Lankan institutions must make a compelling case for credibility and resilience to appear investable, and this includes demonstrating prudent financial management, strong governance frameworks, and alignment with national reform trajectories. For financial institutions like JXG, being a beacon of transparency, professionalism, and innovation can tip the scales in our favour, especially as investors seek local partners who can navigate complexity and deliver sustainable performance.
How could financial institutions balance short-term profitability with long-term financial inclusion?
Financial inclusion is a foundation for long-term profitability. Institutions must shift their focus from profitability to risk-adjusted returns. Metrics like Risk-Adjusted Return on Capital (RAROC) will propel capital allocation and calculated risk-taking without compromising long-term stability.
Investor expectations may evolve, but the core principles remain unchanged: responsible stewardship, inclusive growth, and institutional credibility.
Institutions prioritizing governance and resilience over quarterly earnings will earn the trust of investors and the communities they serve.
How could financial institutions contribute to financial inclusion and economic growth during challenging times?
We must educate the public with a vision of financial freedom. Paint a picture of what financial freedom is and how it can improve their standard of living. If the story is articulate enough, or the picture is clear enough, people will become curious enough to ask what financial literacy is and how it could lead to financial freedom. Such curiosity will transition into knowledge and then into inclusion. The inclusion will be both push and pull.
True financial inclusion is about elevating financial competence across the board. We must expect better digital and financial literacy standards from every band of society, including C-suite executives and Boards. If we amplify financial literacy from the top down, the effects will cascade into smarter personal investment choices and equip society to grow through adversity.