News & market updates

Secondary bond market opened on a bearish note as yields rose across the curve after a 100bp policy rate hike and global yield/oil pressure; key maturities traded around 11.95%–13.11% (01.08.30 11.95–12.10%, 15.01.33 12.30–12.45%, 01.06.33 12.75%, 15.03.35 12.95–13.11%).

Sri Lanka's government says its Rs.57 billion fuel subsidy allocation will end by June, prompting recent fuel price increases. Officials say the state has been covering about Rs.100/litre of diesel and Rs.20/litre of petrol while CPC is incurring losses (Rs.129 diesel, Rs.60 petrol).

Sri Lanka will strictly tighten enforcement of its fuel QR quota after state-run Ceylon Petroleum Corporation's fuel import bill rose to $524mn in May. Officials noted imports were $186mn in January and $97mn in February and said the move aims to curb consumption and dollar outflows.

Oil prices rose after Israeli troops expanded operations into Lebanon, with WTI up 2.88% to $89.88/bbl and Brent up 2.43% to $93.33/bbl; the escalation raises supply-risk upside even as weak Chinese factory activity dampens demand prospects.

Sri Lanka's oil import bill surged 150% YoY to $886 million in April, lifting the first four months' fuel bill 53.6% YoY to $2.16 billion. CBSL attributed the rise to higher global oil prices after the Middle East conflict and bigger import volumes, while the government and Ceylon Petroleum Corporation absorb subsidy losses as diesel is sold below cost.

Colombo headline inflation rose to 5.5% YoY in May (from 5.4% in April), led by non-food price increases in housing, electricity, gas and transport while food inflation slowed to 0.9%. The CBSL said Middle East tensions and energy price escalations keep inflation outlook uncertain and likely above 5% near term.

Sri Lanka's current account slipped into a $532.4m deficit in April, erasing the Q1 surplus and leaving a $0.9m deficit for Jan–Apr, driven by a sharply widened trade gap (imports +45.7% YoY) and weaker tourism amid higher fuel spending; reserves stood at ~$6.8b and IMF review released about $695m.

Sri Lanka's state-owned CPC raised fuel prices effective 31 May — Auto Diesel +Rs15 to Rs.407/litre, Petrol Octane 92 +Rs24 to Rs.434, after multiple hikes that have pushed fuels ~45–57% higher since late February. Fuel import expenditure surged 150% YoY to $886m in April, helping widen the merchandise trade deficit to $1.38bn.

Secondary bond market ended the week bullish, with yields falling about 20–35bps on Friday after US‑Iran ceasefire optimism and Sri Lanka securing IMF 'Super Tranche' approval, despite a 100bp policy-rate hike earlier in the week. Foreign holdings fell Rs.7.33bn to Rs.126.10bn; money-market surplus dropped to Rs.92.15bn and call/repo rates rose to 9.10%/9.13%.

Ceylon Chamber welcomed IMF approval of the combined 5th and 6th EFF reviews, unlocking about $695m in financing, and urged continued reforms to preserve macro stability amid external pressures from the Middle East. It called for a digital fuel QR system, clearer policy communication, and accelerated reforms to boost competitiveness in trade, tourism, logistics and digitalisation.

SAIGE LANKA opened Sri Lanka’s first SAIGE electric motorcycle showroom in Kadawatha, offering models with about 120 km range per full charge and a 5-year battery warranty. The importer plans a head-office charging station and a nationwide dealer network to expand availability.

Sri Lanka raised retail fuel prices effective May 31 (Auto Diesel +Rs15 to Rs407/L; Octane 92 +Rs24 to Rs434; Super Diesel +Rs20 to Rs478; Super Petrol +Rs25 to Rs495; Kerosene +Rs20 to Rs285), as the fuel import bill more than doubled to US$886m in April and prices near 2022 crisis levels.

Cargills (Ceylon) PLC reported a March-quarter profit of Rs2.63bn, up 31% y/y, and FY profit of Rs10.61bn (from Rs7.22bn); quarterly revenue rose 16.8% to Rs69.52bn. The group reduced net debt to Rs16.1bn, recorded non-recurring losses (Rs858m cyclone damage; Rs328m on disposal of a 6.54% stake in Cargills Bank) and warned of energy and currency pressures that could moderate consumption.

Foreign investors sold a net US$22.55 million (Rs 7,328 million) of Sri Lanka government securities in the week ended May 27, central bank data showed. The outflow is the third consecutive weekly net outflow (over US$51m) amid rupee weakness and a recent 100bp policy rate hike after a 35% fuel price rise.

Sri Lanka's current account moved into a deficit in April 2026, driven by a wider trade gap from higher fuel (US$886m in April) and vehicle imports and weaker tourist earnings; the Jan–Apr trade deficit rose to US$3.7bn from US$2.3bn a year earlier. Gross official reserves were about US$6.8bn and the rupee had depreciated 5.4% YTD by end‑May.

John Keells Holdings reported a 218% rise in quarterly profit to LKR 6.31 billion for the quarter ended March 31, 2026, with revenue up 62% to LKR 144.89 billion, driven by retail, transportation and leisure; a final dividend of LKR 0.10 per share was announced.

Sri Lanka's monthly oil import bill rose 149.9% to US$886 million in April as global fuel prices climbed after the Middle East escalation, with fuel accounting for 36% of April's total imports of US$2,457 million. Jan–Apr fuel spending reached US$2,167.7m, up from US$1,411.4m a year earlier.

The Sri Lanka Construction PMI Total Activity Index fell to 45.7 in April 2026, indicating contraction in activity. The decline was linked to the seasonal Sinhala and Tamil New Year slowdown, shortages of petrochemical-based inputs and higher costs from the Middle East conflict; new orders rose on road rehabilitation while suppliers' delivery times lengthened and employment expanded.

Sri Lanka's CCPI rose to 5.5% in May 2026, a 27-month high driven by a c.40% fuel price increase that pushed up both food and non-food items. The central bank this week raised the policy rate by 100 basis points to curb demand-driven inflation.

The Ceylon Chamber of Commerce welcomed IMF approval of Sri Lanka’s 5th and 6th reviews, unlocking about USD 695 million under the EFF, and urged continued engagement and structural reforms to preserve macro stability, support investor confidence and address exchange-rate and energy pressures.

Colombo headline inflation rose to 5.5% year‑on‑year in May 2026 from 5.4% in April, driven by higher non-food prices—notably housing, L.P. gas and petrol—while food inflation eased to 0.9%. Core inflation edged up to 3.9% and inflation is expected to remain above the 5% target near term.

FTZMA met the BOI to press for extending VAT exemptions/zero-rating to indirect/deemed exporters to avoid 18% VAT on locally sourced raw materials. They also raised diesel price disparity between CPC and LIOC, proposed fuel sheds, and noted BOI will retain import/export services while recruiting staff.

IMF Mission Chief Evan Papageorgiou said Sri Lanka’s monetary policy remains broadly appropriate despite a 100-basis-point CBSL rate hike and the IMF approving combined Fifth and Sixth EFF reviews that unlock about $700m. He expects inflation to stay near the 5% target and defended a flexible rupee as a shock absorber against external (including oil) shocks.

President Anura Kumara Dissanayake declared 15 categories of public services — including electricity, fuel distribution, healthcare, transport, ports/airports, water, telecoms, banking and insurance — as essential under the Essential Public Services Act to ensure uninterrupted services in post-disaster conditions.

The Treasury Bond auction was fully subscribed, raising the full Rs.240 billion at the first phase with WAYRs of 11.86% (01.08.30), 12.32% (15.01.33) and 12.93% (15.03.35). Secondary market saw renewed buying; net liquidity surplus was Rs.126.70bn and USD/LKR closed near 328.50/332.

Ceylon Chamber of Commerce welcomed IMF approval of the 5th and 6th EFF reviews, enabling Sri Lanka to access about USD 695 million, and urged continued reform momentum to preserve macroeconomic stability amid external pressures. It reiterated measures including optimizing the fuel QR digital platform, clearer policy communication, and accelerating reforms in trade, tourism, logistics and digitalisation.

Oil futures fell over 1% and were headed for their steepest weekly drop since early April after reports the U.S. and Iran agreed to extend a ceasefire and ease shipping through the Strait of Hormuz, with Brent at $92.67 and U.S. crude at $87.64. Analysts said reopening the strait could ease supply constraints but upstream production and refinery output recovery will be gradual.

Sri Lanka's rupee traded at 328.00/330.00 to the US dollar on Friday and bond yields fell sharply (e.g., the 01.08.2030 bond quoted at 11.80/85% down from ~12.00/15%) after news of a US‑Iran truce and oil falling to $91/bbl; ASPI rose 100.53 pts to 22,299.76.

Speakers at the Sri Lanka Brand Forum Leadership Summit urged companies to redesign strategy for a new era of permanent volatility, prioritising employee wellbeing, organisational resilience (slack resources), decentralised decision-making, and long-term purpose-driven social programs.

Free Lawyers alleged the Central Bank of Sri Lanka expanded M2b by Rs.1,653 billion in 2025 and a further Rs.610.7 billion in Jan–Mar 2026 via dollar purchases, linking this to recent rupee volatility. The CBSL countered that net FX operations injected about Rs.788.9 billion and that liquidity was partly absorbed by government repayments, withdrawals and coupon payments.