News & market updates

Sri Lanka will unveil its 2026 budget on Friday, with the government balancing IMF-driven fiscal discipline against delivering relief as inflation is projected to return to around 5%. The plan must also address high debt, potential tax changes, pressure for capital (construction) spending and SOE reforms such as at CEB and SriLankan Airlines.

Sri Lanka plans to hire 60,000 state workers in the future and has allocated tax revenue to hire 30,000 this year. The recruitments add to a large public service and unfunded pension liabilities as higher taxes follow the 2022 default amid inflation and rupee depreciation.

Foreign investors bought $34.5 mn (Rs 10,359 mn) of Sri Lanka government securities in the week to Oct 30, raising foreign holdings to Rs 141.32 bn, the highest since Nov 9, 2023. Inflows totaled Rs 34,742 mn in the past 10 weeks and about Rs 72.1 bn since Dec 26 last year.

Sri Lanka's rupee weakened to 304.55/80 per US dollar (from 304.45/55), while government bond yields were largely flat across maturities — e.g. 15.12.2026: 8.05-8.15%, 01.07.2028: 9.07-9.12%, 15.12.2029: 9.55-9.58%, 15.12.2032: 10.40-10.48%.

Ceylon Petroleum Corporation reduced its debt to the National Iranian Oil Company to US$130.6m by June 2025 from US$191m a year earlier via a Tea-for-Oil barter agreement. The Finance Ministry report said the settlements and supplier borrowing reflect forex shortages and liquidity measures that have suppressed interest rates.

Secondary bond market yields fell after foreign holdings of Sri Lankan rupee government securities rose by Rs. 10.36 billion in the week to 30 Oct, the largest inflow in 32 weeks. Demand was concentrated in 2026–2030 tenors while a Rs. 57bn weekly T‑bill auction is being offered well below ~Rs. 106.4bn maturing, supporting the rally.

Sri Lanka's rupee opened weaker at 304.54/60 per US dollar and bond yields were broadly steady (e.g. 2028 at 9.03–9.05%, 2032 at 10.40–10.48%), with an ongoing auction of 77,500 million rupees in Treasury bills.

Sri Lanka's Finance Ministry serviced US$1,358.6mn in H1 2025 while Treasury inflows were only US$547.5mn, with the balance funded by unsterilized dollar sales from the Central Bank. Unsterilized interventions increased liquidity and contributed to steady rupee depreciation, with an IMF US$350m tranche easing dollar pressures.

State-run SriLankan Airlines group posted a net loss of Rs10.7 billion in the quarter to June 2025, with operating losses widening to Rs5.2 billion. Revenues rose to Rs51.7 billion on higher passenger traffic and an improved load factor, but cargo declines, finance costs (Rs6.4bn) and exchange losses (Rs4.9bn) drove the group loss.

Sri Lanka's rupee closed at 304.45/55 to the US dollar and government bond yields were mostly lower; the 15.12.2026 bond fell to 8.05/15% (from 8.15/20%) while several other maturities also eased. Yields for some longer-dated bonds showed minor mixed moves.

Fifty-two SOEs posted aggregate profit of Rs. 227.8 billion in 1H 2025, down from Rs. 280.7 billion a year earlier. The drop was driven by a Rs. 13.2 billion net loss at the Ceylon Electricity Board after tariff cuts, despite stronger profits at state banks and Cabinet-approved SOE reforms.

Sri Lanka's rupee opened weaker at 304.45/55 per US dollar and government bond yields were largely steady, with quoted yields roughly 9.00%–10.75% across maturities. A 77,500 million rupee Treasury bill auction is scheduled for Nov 4.

Foreign holdings of rupee-denominated government securities rose by Rs.10.36bn in the week to 31 Oct to Rs.141.32bn, the highest level in two years. Secondary yields fell across the curve after fiscal outperformance and Fed easing; a Rs.77bn T-bill auction is set against ~Rs.106.4bn maturing, interbank liquidity rose to Rs.155.05bn and USD/LKR was ~304.4.

Sri Lanka’s central bank bought US$177.3 million from the market in September 2025 despite a reported current account deficit and continued rupee depreciation. The report notes use of buy-sell dollar swaps, suspended inflationary operations and concerns over reserve and Treasury dollar sales.

The Planters’ Association says Sri Lanka’s April 2021 ban on oil palm cultivation has forced plantation firms (including Watawala, Namunukula, Elpitiya and Malwatte Valley) into write-offs and contributed to over US$175m in edible oil import costs since 2021.

Sri Lanka's forex inflows were US$2,337m in September (down from US$2,521m in August) while imports rose to US$2,048m, leaving a US$289m surplus. Vehicle and fuel import increases drove the shift and analysts warn fiscal-buffer use or liquidity injections could erode reserves and pressure the rupee and rates.

Energy Minister Kumara Jayakody warned that lobbying for higher feed-in tariffs would raise consumer bills, noting solar prices paid to new producers have fallen from 37 → 27 → 24 → 18 rupees. He cited 30% cheaper panels, a stronger rupee, competitive low bids (e.g. Vidullanka ~3.77 USc/kWh) and additional grid/BESS costs.

Sri Lankans spent US$286m on vehicles in September, taking nine-month vehicle imports to US$1.204bn, the central bank said. The central bank bought US$177.3m from forex markets in September, with rupee depreciation linked to dollar purchases, excess liquidity and buy-sell swaps.

Sri Lanka's rupee opened at 304.35/50 to the US dollar, broadly unchanged, while government bond yields were largely steady (e.g. 15.12.2026 at ~8.20–8.30%). The ASPI rose 0.19% to 22,882.

Chinese Ambassador Qi Zhenhong said broader use of the RMB could strengthen Sri Lanka's macro stability and reduce FX risks, noting cross-border RMB receipts and payments reached RMB 35 trillion in 1H2025 (up 14%). He said RMB use would boost trade, investment and financial modernisation and cited RMB clearing banks and CIPS coverage.

Sri Lanka's secondary government bond yields consolidated after the US Fed cut rates by 25bp, with two-way quotes firm and selected maturities trading in the 9.07%-10.60% range. Foreign holdings of rupee G‑Secs rose to Rs.130.96bn and money-market liquidity surplus was Rs.153.72bn.

Sri Lanka's rupee closed at 304.35/54 to the US dollar, marginally firmer, while government bond yields were largely flat. T-bill yields rose 2 basis points at a recent auction amid lower offered maturities, and longer-term yields fell on positive fiscal news.

The Rs.57bn Treasury Bill auction was fully subscribed with 91-day T-bill at 7.52%, while the secondary bond market rallied for a second day as longer-dated yields fell by around 10bp. USD/LKR closed at 304.40/304.55 and system liquidity showed a net surplus of Rs.154.84bn.

Sri Lanka's rupee opened at 304.45/55 to the US dollar while government bond yields were broadly flat after declines; the rupee has fallen from about 302.55/60 since the start of the month. The central bank has stopped printing money via open market operations and is providing liquidity only for clearing at the ceiling rate.

Sri Lanka’s rupee weakened to 304.40/55 to the US dollar while longer-term government bond yields eased across maturities (e.g., 15.12.2026 at 8.20–8.28%).

Sri Lanka sold all offered Treasury bills at Wednesday's auction: 3-month Rs2.84bn at 7.52%, 6-month Rs37.22bn at 7.90% (up 1bp), and 12-month Rs15.0bn at 8.04% (up 2bp). Tax revenues rose 32% while private credit is expanding and the rupee has depreciated, with banks borrowing from the 8.25% window.

Sri Lanka’s rupee was quoted around 304.05/15 to the US dollar and longer-tenor government bond yields fell after fiscal outperformance; dealers noted liquidity imbalances with some banks short of cash and reverse-repo injections halted.

The Cabinet approved awarding a contract to Giesecke & Devrient Asia Pacific Ltd to upgrade the Central Bank of Sri Lanka's currency operations and monitoring. The project aims to strengthen currency monitoring, improve operational efficiency and better manage banknote circulation to support currency stability.

Secondary bond yields fell after the Finance Ministry reported Jan–Sep fiscal outperformance, with the nominal deficit narrowing 54.5% to Rs.441.4bn and tax revenue up 32.5%. The move, reinforced by a central bank note that inflation may stay below target, pushed 2028–2030 yields lower ahead of a Rs.57bn T‑bill auction.

Sri Lanka rupee closed flat at 304.10/25 to the US dollar while government bond yields fell, with several maturities quoted lower. An auction of Rs.57,000 million Treasury bills is scheduled for Oct 29.