News & market updates

Oil climbed about 2% to a three-week high of $107.97 a barrel as stalled U.S.-Iran talks prolonged disruptions to Middle East energy exports. Renewed AI-driven buying lifted chip stocks while markets braced for multiple central bank meetings and interest-rate guidance this week.

Primary surplus rose 86.7% YoY to Rs.222.82bn in Jan 2026 and the overall budget deficit narrowed to Rs.3.81bn, reflecting marked fiscal consolidation and bringing Sri Lanka closer to a ~$700m IMF tranche conditional on pricing reforms. Higher energy costs and reconstruction spending remain risks; the government announced a Rs.100bn short-term relief package for the energy shock.

JB Securities says vehicle import values fell to $148.4m in February from $240.9m in December 2025, signalling a tapering contribution from vehicle imports to growth and fiscal revenues. It also warns fuel prices will rise on 1 May (diesel more) and expects higher EV demand and rooftop solar uptake.

Money market liquidity surplus rose sharply to Rs. 199.17 billion from Rs. 106.32 billion. T-bill yields moderated at the auction (aggregate accepted Rs. 121bn), foreign holdings of rupee Treasuries rose by Rs. 1.28bn to Rs. 144.20bn, and USD/LKR weakened to Rs. 318.40/318.70.

Diesel & Motor Engineering (DIMO.N0000) hosted the Mercedes‑Benz Flying Doctor Service Clinic from 6–10 April 2026 focused exclusively on EQ electric models, providing factory-level diagnostics and one-on-one technical consultations to strengthen EV aftersales support in Sri Lanka.

CPC reported a profit of Rs. 36.4 billion in 2025, its third consecutive annual profit. The Central Bank said cost-reflective pricing and lower average Brent crude ($68.25, -14.5%) helped results, though crude spiked in March 2026 due to Middle East tensions.

UNDP warns more than 30 million people could be pushed back into poverty from the economic fallout of the Iran war, driven by disruptions to fuel and fertiliser supplies and blocked shipping through the Strait of Hormuz. It said fertiliser shortages have already reduced agricultural productivity and food insecurity will peak in a few months.

Asia shares were mixed while oil rose over 1% as Middle East tensions and stalled U.S.-Iran talks kept markets on edge; Brent hit $106.21/bbl and U.S. crude $96.77. Investors also eyed central bank decisions next week and a yen near 159.78 per dollar.

Sri Lanka’s Minister of Agriculture K.D. Lal Kantha reaffirmed the country’s active engagement at the FAO Regional Conference (APRC38), prioritizing stronger domestic production, reduced import dependency, agricultural modernization through digital governance and water management, and export-oriented villages.

Fitch warns emerging Asia could face rising food-cost pressure if a prolonged US–Iran war disrupts fertiliser supplies, noting nitrogen urea prices have risen about 50% to roughly USD700/tonne and could cut yields and raise food prices later in 2026. Countries with low stockpiles and import dependence are most exposed.

WFP warns the Middle East conflict is threatening Sri Lanka's recovery by driving fuel costs up 33–40%, raising food and fertiliser import bills (Sri Lanka imported $2.5bn of food in 2025) and risking remittances (around 80% originate in the Gulf). These shocks could push inflation higher, weaken the rupee, strain reserves and hit tourism and household food security.

Advocata Institute says the recent LPG retail increase of Rs.775 left a shortfall of Rs.225–425 per 12.5kg cylinder after Saudi Aramco’s benchmark added Rs.1,000–1,200 to landing costs, with the gap covered by cross-subsidisation that shifts costs onto households. It urges cost-reflective pricing and targeted cash transfers.

Prof. Samitha Hettige argues Sri Lanka should adopt cleaner coal technologies and leverage China’s BRI to strengthen energy security, citing the Norochcholai (Lakvijaya) coal plant and Chinese advances in high-efficiency coal units.

Petroleum Distributors’ Association has appealed to President Dissanayake to revise CPC Circular No.1109 (effective 1 Mar 2025) that replaced percentage commissions with a fixed per‑litre margin, saying it makes dealer operations financially unsustainable and risks station closures.

Secondary bond yields held broadly steady with key maturities trading between 8.40% (01.08.26) and 11.00% (01.11.33); a Rs.110 billion Treasury Bill auction (Rs.45bn 91-day, Rs.35bn 182-day, Rs.30bn 364-day) is due today. USD/LKR closed at 316.50/316.75 and net liquidity surplus stood at Rs.123.32bn.

Colombo stocks rose 0.25% as foreign investors turned net buyers after a 21-session selling streak, recording a net inflow of Rs. 19.8 million and lifting the ASPI 55.45 points to 22,625.48. Top contributors included CINS, BUKI, CFIN, MELS and NHL, while consumer services led turnover and oil price moderation supported sentiment.

DFCC Bank convened a discussion examining how the Middle East conflict could transmit into Sri Lanka’s economy, highlighting energy price, shipping, FX, tourism and remittance channels. The forum emphasised banks’ role in helping clients manage FX exposure, trade finance and liquidity amid rising uncertainty.

SLCPI has called for urgent action to prevent looming medicine shortages in Sri Lanka. It said rising fuel (+38%) and freight (+40%) costs, API/input price increases (up to 70%), rupee depreciation and import‑licence/pricing delays are disrupting pharmaceutical imports and supply continuity.

The Central Bank's Annual Economic Review 2025 reports real GDP growth of 5% and continued macroeconomic stabilization, with a third consecutive current-account surplus and reserve build-up. Monetary policy remained accommodative supporting low interest rates, credit expansion and improved bank/non-bank profitability, while exchange-rate flexibility and easing capital controls were noted.

Industry leaders at a Sri Lanka-Italy Business Council forum warned geopolitical tensions are testing Sri Lanka’s 2026 recovery, citing a 17.4% drop in tourism to 22 March, ~35% of shipping routes affected and sharp rises in freight, insurance and energy costs that could hit exports and tourism if prolonged.

Anura Karunathilaka was appointed Energy Minister and will continue to hold the Ports and Civil Aviation portfolio after Kumara Jayakody resigned amid allegations linked to a coal procurement scam.

Transport Minister Bimal Rathnayake said Central Expressway Phase III is progressing, with the Pothuhera–Rambukkana stretch about 75% complete by March and a ~Rs.2 trillion public infrastructure pipeline planned for 2026–2028. Analysts warn rising input costs, tight financing and potential energy shocks could pressure timelines and margins, especially for smaller contractors.

Heads of Multilateral Development Banks agreed to deepen cooperation to provide timely support to countries amid global uncertainty, prioritising mobilisation of private finance, scaling local-currency financing, and joint initiatives on critical minerals, water infrastructure and AI.

Secondary bond yields held broadly steady, with total secondary Treasury bond/bill turnover of Rs. 9.50 billion on 17 April. Money markets recorded a net liquidity surplus of Rs. 112.44 billion, SDFR deposits of Rs. 138.44 billion at 7.25%, overnight rates ~7.67–7.70% and USD/LKR ~316.40/316.90.

U.S. stocks retreated as Mideast tensions sent oil up about 5% to $88.21/bbl (Brent $94.86), while 10-year Treasury yields ticked higher and the dollar eased.

The ASPI fell 0.89% (203.26 pts) to 22,570.03 as Middle East tensions and higher global oil prices weighed on the Colombo bourse. RIL Property, C T Holdings, Commercial Bank and Browns Investments were among top negative contributors while Hikkaduwa Beach Resort and other tourism counters saw notable retail turnover.

Fitch said the risk outlook for global credit has risen “substantially”, citing the US war on Iran and a possible sustained oil and gas supply shock that raises commodity and energy price assumptions. It also kept Sri Lanka at 'CCC+', constrained by high government debt and interest/revenue ratios despite reform progress.

World Bank projects Sri Lanka's growth will moderate to 3.6% in 2026, citing higher energy prices and a transition to more sustainable growth. It flagged risks from persistently high energy costs, flight disruptions hitting tourism, skilled-labour shortages, weak public capex execution and climate shocks.

CBSL's PMI showed Manufacturing PMI rose to 66.7 in March (from 56.8 in February) and Services PMI rose to 59.4 (from 54.4). Expansion was led by seasonal demand, financial services and retail, though firms reported raw-material and fuel shortages, shipping delays and Middle East conflict risks.

Secondary bond market ended the week steady to marginally lower with notable yield compression in the 2029–2034 tenors. T-bill weighted average yields rose (91d 8.15%, 182d 8.22%, 364d 8.52%) amid an undersubscribed auction; foreign holdings saw a Rs.2m net inflow and USD/LKR closed at 316.55/316.70.