News & market updates

Sri Lanka’s central bank raised the Overnight Policy Rate by 100bps to 8.75% to address rising inflation, credit expansion and external pressures; the statement cited 5.4% y/y inflation in April, high fuel prices, a wider trade deficit and gross official reserves of USD 6.8bn.

The central bank hiked rates 100bp to 8.75%, and the Colombo Stock Exchange fell with the ASPI down 0.51% to 22,249.88; market turnover was Rs.2.99bn with insurance leading at Rs.2.6bn. Lanka Ashok Leyland proposed a final dividend of Rs30/share and Lighthouse Hotel declared a final dividend of Rs3/share.

Sri Lanka's Central Bank urged the public not to be misled by claims it has 'printed money', saying money supply and exchange rates require specialist technical analysis. The statement comes ahead of a monetary policy meeting amid speculation the Bank may tighten policy to support the rupee and curb cost‑push inflation after a fuel price hike.

Sri Lanka's rupee closed at 325.50/327.00 to the US dollar on Monday (from 329.00/331.00 on Friday) while government bond yields fell sharply (e.g. the 15.09.2027 bond quoted at 9.15/50%).

Colombo Stock Exchange closed higher, with the ASPI up 1.98% to 22,364.77, as rupee stabilisation and lower interest rates boosted investor confidence. Ceylon Cold Stores and Hemas posted strong quarterly profits and John Keells declared a final dividend; Dialog, Commercial Bank and Sampath gained while hSenid and Dipped Products fell.

Sri Lanka's rupee was quoted at 328.00/335.00 to the US dollar, weaker than on Friday, while bond yields held firm with maturities quoted around 10.20%–11.35%. Exporters feared new surrender rules and interbank markets resumed activity after strong forward selling by exporters.

Dr Rohitha Silva has been appointed President of the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL). He is Chairman and MD of idac Ltd and will focus on supporting SMEs, strengthening trade linkages and aiding private-sector recovery amid FX shortages, inflation and high finance costs.

Foreign investors sold about US$13.9m (4,580 million rupees) of Sri Lanka government securities in the week to May 21 amid depreciation pressure on the rupee. The currency is down over 7% YTD and higher inflation after a ~35% fuel price hike has increased pressure on the central bank ahead of its policy meeting.

Deputy Finance and Planning Minister Dr. Anil Jayantha Fernando defended Sri Lanka's flexible exchange rate and independent monetary policy amid rupee pressure, noting the interbank rate averaged Rs.330/USD (bids Rs.327, offers Rs.332). He warned fuel import costs could hit $521m in May, forecast remittances above $9b and expected IMF tranche approvals.

ASPI fell 4.26% for the week but closed Friday up 0.44% at 21,929.64, with market turnover near Rs.2.2bn and net foreign outflow of Rs.11.6m; top positive contributors were JKH, DOCK, MELS, RICH and SAMP amid cautious investors ahead of the CBSL policy meeting.

Sri Lanka's rupee spot closed at 329.00/331.00 to the US dollar on Friday, recovering from 342.00/350.00 the previous day, while government bond yields fell across multiple maturities.

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.

Sri Lanka sold Rs100 million of 3-month Treasury bills on tap at an average yield of 8.18%, bringing total T-bill sales this week to Rs67,337 million; settlement is due May 22.

The IMF Executive Board will consider Sri Lanka's combined Fifth and Sixth reviews under the Extended Fund Facility on Wednesday (May 27). The IMF says authorities have made significant progress restoring macro stability and reserves, while noting renewed external pressures.

Sri Lanka's rupee spot offer was 343.00 to the US dollar on Friday, while government bond yields eased — e.g. the 01.07.2028 bond at 10.35/40% and the 15.12.2029 bond at 10.35/50%.

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.

IMF mission chief Evan Papageorgiou urged Sri Lanka to continue allowing the economy to adjust as the rupee has depreciated sharply ahead of IMF Board approval of the fifth and sixth EFF reviews next week (May 27). He noted authorities have made progress restoring macro stability, rebuilding reserves and strengthening confidence.

Opposition Leader Sajith Premadasa urged the government to begin negotiating a successor IMF programme, warning Sri Lanka is likely to miss the March 2027 reserves target (current reserves US$7bn vs target US$14.2bn) as the rupee has weakened ~14% in 12 months. Analysts say higher import-driven inflation and recent depreciation put pressure on the Central Bank to raise interest rates.

Sri Lanka's rupee traded at 342.00/350.00 to the US dollar on Thursday (telegraphic transfer 345.00/354.00) while government bond yields rose; the 15.12.2029 bond closed at 10.50/65% (up from 10.30/45%) and other mid- to long-dated yields moved higher.

Sri Lanka's national YoY inflation (NCPI) rose to 4.7% in April 2026 from 2.4% in March; food inflation increased to 1.1% (from 0.7%) and non-food inflation to 7.8% (from 3.8%).

CBSL Governor Nandalal Weerasinghe defended Sri Lanka’s flexible exchange rate at a Committee on Public Finance hearing, saying rupee depreciation does not change external debt in dollar terms and that exchange-rate flexibility aids reserve rebuilding and competitiveness. He urged strengthening dollar earnings via exports and remittances and stressed the CBSL's mandate on price and financial stability.

Sri Lanka's rupee traded at 343.50/352.50 (TT buying/selling) on May 21, 2026, while government bond yields rose; e.g., the 15.12.2029 was quoted 10.30/40% (from 10.30/45%), 01.08.2030 10.45/55% (from 10.35/50%) and 15.06.2034 11.55/65% (from 11.40/50%).

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 rupee sold at Rs.345.50 to the US dollar (TT selling) on May 20, with intraday spot trades at 329.25–330.25; bond yields rose, with 2029–2034 maturities moving up to around 10.30–11.50%.

Sri Lanka sold 67.23 billion rupees of Treasury bills at Wednesday's auction (offered 140 billion), with the 3-month yield up 5bp to 8.18%, the 6-month up 2bp to 8.25% and the 12-month unchanged at 8.49%. All three bills are on tap and settlement is May 22; Phase II subscription rules apply.

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.

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.