News & market updates

Speakers at a Ceylon Chamber forum urged Sri Lanka to adopt clear technical and safety standards and frameworks to scale renewable energy and storage, improve grid reliability and attract investment. They also highlighted skills development, industry–academia links and alignment with digitalisation needs like AI, e-mobility and data centres.

Oil prices fell about 1% for a third straight day after the US and Iran made progress in indirect talks in Doha; Brent was $70.78/bbl and WTI $67.74/bbl. UBS cut its Brent forecasts and sources said OPEC+ may raise output targets, adding downward pressure on prices.

German Ambassador Felix Neumann urged continued trade facilitation to boost Sri Lanka–Germany ties, highlighting opportunities in logistics, manufacturing, renewable energy, digital transformation and tourism. He delivered the keynote at the Sri Lanka–Germany Business Council Members' Day to promote investment and collaboration.

The World Bank approved $150m in financing (REGROW DPO) to support Sri Lanka's reform agenda to boost investment, competitiveness, high-value exports and jobs. The first of three operations focuses on reducing trade barriers, improving the investment climate, strengthening the financial sector and power competitiveness.

Government launches national El Niño response, directing ministries to submit contingency plans within two weeks after a 63% assessed probability of a strong El Niño. Plans must cover food, water and energy contingencies and official updates will be issued only by the Department of Meteorology.

Ceylon Chamber of Commerce held a forum on Sri Lanka's energy transition, focusing on renewable deployment, energy storage, grid modernization, technical and safety standards, and policy frameworks to attract investment and support digitalisation (AI, e-mobility, data centres).

Colombo Stock Exchange closed with the ASPI down 0.06% at 22,229.71 while the S&P SL20 rose 0.05% to 6,209.85; market turnover was Rs.1.52bn and capital goods led turnover at Rs.834.9m. Dialog, Melstacorp and Bukit Darah were positive contributors, Aitken Spence, DFCC Bank and Ceylon Tobacco were top decliners, crossings were recorded in Hemas, Windforce and Printcare, and SANASA Life raised Rs.500m via subordinated debentures to meet regulatory capital requirements.

Sri Lanka's monthly oil import bill rose 112% year-on-year to US$536 million in May, driven by higher oil prices and volumes, though it fell 39.5% from April's US$886 million.

Sri Lanka's current account recorded a US$194 million deficit in May 2026, the second consecutive monthly deficit and leaving a US$97 million deficit for January–May. The trade gap widened to US$4.7bn (Jan–May), fuel import spending rose 112% YoY in May, tourist earnings fell 5.1% YoY in May, remittances rose 26% YTD, reserves were US$6.9bn and the rupee was down 7.9% YTD.

The World Bank approved US$150 million for the REGROW DPO to support Sri Lanka's reform agenda focused on boosting investment, competitiveness and jobs. The operation backs reforms to reduce trade barriers, improve the investment climate, strengthen the financial sector and enhance power sector competitiveness to lower energy costs.

Sri Lanka's current account posted a US$194m deficit in May 2026, the second consecutive monthly deficit, driven by a wider trade gap and a smaller services surplus despite higher remittances. The cumulative trade deficit reached US$4.7bn Jan–May 2026, fuel imports rose 112% YoY in May, and gross official reserves were US$6.9bn at end-May.

The IMF said the Seventh Review of Sri Lanka's Extended Fund Facility will assess program performance and place greater emphasis on growth-oriented reforms, including fiscal, monetary and governance measures and energy pricing. Only the Seventh and Eighth reviews remain and the IMF will continue policy advice and technical assistance.

IMF welcomed Sri Lanka's broad-based revenue gains and reiterated that energy pricing reforms and public finance measures remain central to the EFF program, noting on-budget transfers are considered in cost-recovery assessments and work on electricity tariff methodology and tax registry reforms is ongoing.

DIMO added 18MW of solar capacity via four new Galle plants, raising its cumulative solar generation to 25.845 MW (AC). The projects are expected to produce about 31.8 million kWh/year, cut ~12,945 tCO2e annually and supply ~37,937 households.

Opposition Leader Sajith Premadasa urged a whole-of-government, science-based National Climate Resilience strategy, warning of a limited window before a likely strong 2026–27 El Niño and proposing anticipatory governance, reservoir/water management, climate-smart agriculture, early warning systems and a disaster intelligence centre.

Colombo market opened down 0.65% as the ASPI fell 146.53 points to 22,263.28 with turnover over Rs.1.7bn and foreign net outflow of Rs.466.1m; Windforce, CIC and Hayleys were main negative contributors while Windforce, Colombo Dockyard and Sathosa Motors led turnover.

IMF mission chief Evan Papargeorgiou urged Sri Lanka to 'stay the course' and sustain reform momentum after staff-level talks, saying the IMF has relaxed some EFF targets as fuel prices rose about 50% and monetary tightening may slow growth. He noted authorities have delayed reforms at loss-making SOEs including SriLankan Airlines, Ceylon Petroleum Corporation and Ceylon Electricity Board.

Sri Lanka's inflation rose to 6.8% in June 2026, the highest since June 2023 and close to the Central Bank's 7% upper target. The rise was driven by a ~47% fuel price hike and higher food and transport costs; the Central Bank raised its policy rate by 100bp.

The Ceylon Chamber met IMF staff during the fund’s recent visit to discuss sustaining macroeconomic stability and priorities for H2 2026, focusing on improving the investment climate, export expansion, tourism and agriculture support, energy-sector reforms and accelerating digitalisation.

Colombo headline inflation rose to 6.8% Y-o-Y in June 2026 (from 5.5% in May), with a 2.1% month-on-month increase driven by food (fish, vegetables) and non-food items amid energy price pass-through. The Central Bank projects inflation to remain above the 5% target near term before easing, with elevated uncertainty due to Middle East tensions.

IMF staff completed a June 24–30 visit, noting inflation rose from 1.6% y/y in Feb to 5.5% y/y in May after energy price increases and that authorities responded with a 100 bps policy rate hike and temporary on-budget relief (fuel, electricity, fertilizer, cash transfers). The IMF said sustaining reforms is critical and the Seventh Review of the EFF will assess program progress in the fall.

Scouts, a Sri Lankan drone and robotics startup, closed a funding round at a LKR 1.6 billion valuation. Investors include SITREK Group and industry figures; the company targets security, precision agriculture and renewable-energy asset inspection with AI-enabled drones.

At MWC Shanghai 2026 Sri Lanka presented a plan to become a regional AI and digital-infrastructure hub, promoting green-powered data centres, submarine-cable interconnection and sovereign/local-language AI to attract investment and regional partnerships.

Ceylon Petroleum Corporation cut Auto Diesel by Rs.25 to Rs.382 per litre and 92 Octane Petrol by Rs.20 to Rs.414 per litre with effect from midnight; Super Diesel, 95 Octane Petrol and Kerosene prices remain unchanged at Rs.478, Rs.478 and Rs.285 respectively.

Asian stocks closed a strong quarter — Japan's Nikkei is set for a ~36% quarterly rise and South Korea's KOSPI about 65% — as a resurgent dollar (index +1.3% this quarter) pushed the yen to a four-decade low of 162.41 and sent gold sharply lower; Brent crude at $72.49/bbl.

Sri Lanka cut fuel prices effective June 30: Auto Diesel down Rs25 to Rs382/litre and Octane 92 down Rs20 to Rs414. Prices had risen sharply since Feb, driving up transport and grocery costs and pressuring retailers and logistics.

The LMD-PEPPERCUBE Business Confidence Index fell 16 points to 132 in June, marking a 20-month low. The drop accompanies a 7.8% year-to-date rupee depreciation, fuel price hikes, central bank forex interventions (over US$223m sold in May) and elevated inflation risks.

Colombo Stock Exchange ASPI fell 0.65% to 22,263.28, with utilities leading turnover at Rs.486 million. Top movers included Lighthouse Hotel (+4.64%), HNB (+0.19%), Sampath (+0.17%) and Pan Asia (+1.29%); Windforce (-5.12%) and Hayleys (-0.94%) were top decliners, and Asia Asset Finance declared a Rs.0.70 dividend on its convertible preference shares.

Colombo Stock Exchange ASPI fell 0.45% midday to 22,309.09 with turnover of 951.8 million rupees, utilities contributing 448.6 million. Convenience Foods Lanka authorized an 8.00 rupee first-and-final dividend and Tokyo Cement proposed a 2.50 rupee first-and-final dividend.