News & market updates

ITAK MP Shanakiyan Rasamanickam called for a bipartisan national response and proposed expanding Aswesuma, transport subsidies, temporary VAT relief on essentials and measures to stabilise the rupee after it weakened about 6% to Rs.327.60 by 18 May 2026. He also urged curbs on luxury imports, criticised untargeted fuel subsidies and proposed a Sri Lanka Development Fund to boost tourism and FDI.

State-owned Ceylon Petroleum Corporation's May oil import bill rose to US$521mn from US$152mn in December due to Middle East conflict-driven crude price spikes; officials expect it to ease to US$332mn in June and US$241mn in July. First-quarter fuel imports for all retailers totalled US$1,281.5mn, consuming about 20% of Sri Lanka's import budget and draining FX reserves.

Sri Lanka imposed a temporary 50% surcharge on customs import duty for new personal vehicles from May 16, and 9,429 letters of credit for vehicle imports were opened on May 18. The surcharge aims to curb imports and protect foreign reserves amid rupee depreciation, higher import costs and excess liquidity concerns.

Brent crude rose 2% to $104.71 a barrel as hopes of progress in US‑Iran talks and supply worries pushed oil higher, while the US dollar hovered near six‑week highs and markets priced in possible Fed rate hikes; MSCI Asia ex‑Japan rose 0.3% and WTI was $98.01.

The Central Bank met bankers and currency dealers as the rupee weakened—TT LKR/USD at Rs.342.63/354.03 and interbank trading around Rs.331–348—and authorities are considering tighter FX rules and a possible 50–100bp policy rate hike to curb volatility.

CT Smith says Sri Lanka's current pressures are driven mainly by an external energy shock, with near-term multilateral inflows of about $1.38–1.4bn (IMF $700m, ADB $480m, World Bank $200m) expected to help stabilize the rupee. The firm notes the rupee has weakened ~6.2% YTD to Rs329.64, inflation rose to 5.4% in April, and the CBSL policy decision is due 26 May (base case: rates held at 7.75%).

Opposition Leader Sajith Premadasa urged the Government to begin negotiating a successor IMF program, saying Sri Lanka has $7bn in reserves against the IMF's $14.2bn target by March 2027 and would need about $600m/month to bridge the gap. He noted ongoing talks with the IMF to adjust the current EFF amid Middle East war-driven oil-price shocks and rupee weakness.

Government expects to settle nearly Rs. 15 billion in outstanding dues to renewable energy developers by end-June, with Rs. 2 billion released on 19 May and a further Rs. 1 billion due next week; payment delays have affected 386 developers.

Energy Minister Anura Karunathilaka said the government will not seek a further electricity tariff increase from the PUCSL before September and has provided a Rs.15 billion subsidy to cushion other consumers. The latest revision mainly affects users consuming over 180 units/month amid USD appreciation and Middle East pressures on energy costs.

PUCSL found coal supplied by Trident Chemphar caused operational, environmental and financial impacts at Lakvijaya (Norochcholai), estimating about Rs. 8.497 billion in shipment-related losses. The plant could not reach 900 MW (units fell to 253–292 MW), specific coal consumption rose from 364 g/kWh to 391–452 g/kWh, fly ash discharge roughly doubled, and delayed shipments risk power shortages during peak demand months.

The Sri Lankan government will settle nearly Rs15bn owed to renewable energy developers by end-June. The National System Operator has released Rs2bn on May 19 and plans a further Rs1bn next week, with delayed payments having affected about 386 developers and risking industry collapse.

Sri Lankan rupee weakened further, with commercial bank TT rates at Rs. 332.09/342.70 and spot trading around Rs. 329.25–330.25, extending depreciation amid strong dollar demand, higher fuel import costs and Middle East tensions.

The Joint Apparel Association Forum (JAAF) said the Sri Lankan rupee's 4.8% depreciation against the US dollar reflects wider global pressures (Middle East conflict, higher fuel and shipping costs) rather than domestic weakness, and that a weaker rupee can boost apparel export competitiveness.

Sri Lanka's rupee has fallen 4.6% this month and slid to 334.52 per dollar, which officials attribute to speculation, a six-fold surge in the fuel import bill, and outflows from government securities and the stock market.

Sri Lanka's tea exports fell 17.3% YoY in March to $114.75m as the Middle East conflict disrupts shipments; Dilmah (CTEA.N0000), which derives about 30% of sales from the Middle East, reports logistics and fuel-cost pressures and is shifting into new markets.

Dividend · Rs 5.00

First And Final dividend of LKR 5/share; FY 2025-26

JAAF said the Sri Lankan rupee's recent 4.8% depreciation reflects global pressures (Middle East conflict, higher fuel and shipping costs) rather than domestic weakness, and that a managed weaker rupee can boost apparel export competitiveness, jobs and FX earnings.

Sri Lanka recorded 22,473 new active credit cards in March, raising total active cards to 2,215,853 (a 1% month-on-month increase). Growth was driven by economic recovery, lower interest rates and bank promotions, though fuel rationing and potential policy tightening may slow future gains.

Government imposed $27 million in penalties on the first 15 coal shipments for the 900 MW Norochcholai (Lakvijaya) power station after tests found the coal's GCV below specification. Authorities say they have withheld over $37 million in total (including $22m fines and $15m in performance bonds) and will not pay demurrage; supplier named as Trident Chemphar Ltd.

Rupee weakened, closing at Rs. 326.92 per USD (previously Rs. 325.62) with spot trades ranging Rs. 327.85–328.90 as depreciation continued. Officials cited global uncertainty, Middle East tensions, higher oil prices, importer demand and delayed export conversion; Central Bank says it follows a flexible exchange rate.

Secondary bond market turned bearish and yields rose for a second day, with some maturities trading up to 11.48%, ahead of today's Rs.140 billion T-Bill auction. Net liquidity surplus was Rs.181.68bn and USD/LKR spot traded around Rs.328 with $76.25m volume.

Economist Ganeshan Wignaraja said Sri Lanka should plan for an 18th IMF programme as the current programme ends in mid-2027 and large debt repayments fall due from 2028. He warned Cyclone Ditwah and the Middle East war have raised oil prices, hit remittances and tourism, and pushed the economy toward a slower-growth, higher-inflation scenario.

Foreign investors sold a net US$14.77mn (4,725m rupees) of Sri Lanka government securities in the week to May 14, making rupee bonds a net outflow for the year amid renewed rupee depreciation fears. The rupee is down over 5% YTD and a 35% fuel price hike has pushed inflation higher, pressuring central bank policy.

Sri Lanka has imposed US$27mn in penalties on 15 coal shipments for wrong specifications; together with a US$15mn performance bond the recoverable amount is US$42mn. Tests found lower GCV coal supplied by Indian firm Trident Chemphar Ltd to the Norochcholai power plant; 17 of 19 term shipments arrived late but the government says no demurrage will be paid.

Asian shares were mixed and global bonds recovered after U.S. President Donald Trump paused a planned attack on Iran, sending Brent crude down over 2% to $109.41/bbl and 10-year U.S. Treasury yields easing to about 4.60%. Nvidia earnings due Wednesday will test AI-driven market sentiment.

Secondary bond yields rose this week amid Middle East tensions and higher Brent crude, with the 15.12.27 at 9.20%, 15.10.29 at 10.00% and the 01.06.33 at 11.05%. Money-market liquidity showed a Rs.183.53bn surplus (Rs.151.18bn at SDFR 7.25%), the CB drained Rs.75bn via overnight repo at 7.73%, and USD/LKR traded 326.50–327.50 ($86.5m volume).

Global stocks slipped as drone attacks in the Gulf pushed Brent to about $110.55/bbl and U.S. crude to $102.48, lifting bond yields and stoking inflation concerns. S&P 500 and Nasdaq futures fell ~0.5%, European markets were mostly lower and Asian shares were mixed after weak Chinese data.

HNB Stockbrokers says Sri Lanka's three-month fuel subsidy (Rs100/l diesel, Rs20/l petrol) will cost about Rs.57 billion and could rise to roughly Rs.150 billion if extended to year-end, risking erosion of fiscal buffers and conflicting with IMF cost-recovery pricing and targeting requirements.

Government announced an additional Rs. 2.5 billion fertiliser subsidy for tea smallholders and growers as emergency relief amid Gulf-related cost pressures and adverse weather. Tea export earnings fell 5.22% YoY to $351.58m in 1Q 2026, with production and volumes also down.

Nine major Middle East airports lost an estimated $900m–$1bn in revenue over March–April 2026, a 55% shortfall after a 27m passenger decline (54% YoY) and steep cargo drops. Jet fuel costs nearly doubled and average scheduled capacity fell to ~53%, pressuring operators' cash flows.