News & market updates

Opposition MP Faiszer Musthapha warned amendments to the Colombo Port City Economic Commission Act would allow the Port City Commission to issue offshore banking licences outside the Banking Act, creating shadow-banking and systemic risk. He said permitting Port City offshore banks to borrow from domestic banks and lower capital requirements could strain FX reserves and disadvantage local banks.

Workers' remittances reached a record $8.07bn in 2025, with December inflows of $879.1m (up 43.2% YoY). The surge was driven by higher per-worker transfers and CBSL's move to end the parallel exchange-rate regime, bolstering reserves and liquidity.

The Ceylon Electricity Board has requested an 11% tariff increase from the regulator, citing a depreciated rupee (using 308.65/USD vs 303.33 previously) and higher local diesel and fuel costs despite falling global crude and coal prices.

Secondary bond yields closed lower week-on-week, led by sustained buying in the 2029–2030 maturities; a Rs.205 billion Treasury bond auction is scheduled for 12 January (settlement 16 Jan). Money-market liquidity rose to Rs.171.03 billion and USD/LKR closed around 309.00/309.30; weekly T-bill yields increased (91-day 7.88%, 364-day 8.47%).

Private credit from commercial banks rose to a new monthly high of Rs262 billion in November 2025, taking total private credit to Rs10,029 billion and 12-month growth to 26%. Net bank credit to government fell and the rupee weakened to 308/USD, prompting concerns about the central bank's operating framework.

Sri Lanka's official worker remittances rose 43.2% to a record US$879.1m in December 2025, and full-year remittances reached US$8,076.2m. The rise is linked to ending the parallel exchange rate, central bank policy shifts and budget measures (housing loans, contributory pensions) to boost remittances.

Sri Lanka's workers' remittances reached a record USD 8.07 billion in 2025, up 22.8% from USD 6.57 billion in 2024. December 2025 also set a monthly record at USD 879.1 million.

The central bank bought US$250.8m in December 2025 and sold US$28.3m, contributing to roughly a three‑unit depreciation of the rupee to about 309.5–310. Analysts say these central-bank dollar purchases monetize reserves, conflict with domestic rate anchors, and risk higher energy/food prices and strain on state utilities.

Sri Lanka's rupee closed at 309.00/30 to the US dollar on Friday, slightly stronger than 309.10/50 the previous day; government bond yields were broadly steady, with the 15.12.2026 bond at about 8.45–8.50% and longer-dated yields around 9.2–10.6%.

Sri Lanka's rupee opened at 309.15/30 to the US dollar, relatively flat versus the previous day; government bond yields opened slightly higher (15.12.2029 ~9.64–9.67%, 01.07.2030 ~9.71–9.75%). The ASPI was up 0.37% at 23,614.

Central bank lending to banks rose to Rs48 billion on Jan 08 as state banks faced a severe cash crunch, raising liquidity concerns. Analysts warned the government's 'domestic buffer' withdrawals could strain interbank markets, prompt central bank accommodation and pressure interest rates, inflation and the rupee.

CBSL Governor said gross official reserves rose to over $6.8 billion by end‑2025, the highest since the crisis, driven mainly by about $2.0bn of CBSL net foreign‑exchange purchases and multilateral inflows. The central bank will continue market‑based purchases while maintaining exchange‑rate flexibility.

Central Bank Governor Nandalal Weerasinghe said Sri Lanka will face a 2026 AML/CFT/CPF Mutual Evaluation assessing FATF's 40 Recommendations and 11 Immediate Outcomes and warned an adverse result could trigger FATF grey listing, raising compliance costs and hurting growth and investor confidence. He said the FIU will lead national preparations and recent reforms have strengthened readiness.

Secondary Treasury bond yields fell amid strong buying and higher volumes; the Treasury announced a Rs.205 billion bond auction for 12 January. The rupee strengthened to Rs.309.10/309.50, net liquidity surplus was Rs.168.45 billion and secondary bond turnover was Rs.76.86 billion on 7 Jan.

India will disburse about US$350m (of a US$450m package) to Sri Lanka denominated in Indian rupees, including US$100m in grants, to fund cyclone recovery — rebuilding roads, bridges and rail, housing, health, education and agriculture.

Sri Lanka's Central Bank will introduce a benchmark intra-day reference exchange rate in 2026 to boost transparency in the foreign exchange market and enable rupee-denominated derivatives. The measure aims to reduce volatility, promote more competitive pricing and deepen the FX market, and dealers welcomed it.

Sri Lanka's rupee closed stronger at 309.10/50 to the US dollar (from 310.05/15) on Thursday, while government bond yields fell across maturities (e.g. 15.12.2026 at 8.45-55%, 15.03.2031 at 9.85-93%).

Deputy Finance Minister Anil Jayantha defended the central bank’s 5% inflation target as appropriate for a developing, open economy and supportive of growth; critics warn the higher target risks exchange-rate depreciation and external instability.

Central Bank of Sri Lanka forecasts 4-5% economic growth in 2026, citing private credit expansion, a surplus external current account and gross official reserves above US$6.8bn, while warning of risks from Cyclone Ditwah. Inflation is expected to reach the 5% target by H2 2026 and the CBSL prioritises data-driven monetary policy and resilience measures.

Sri Lanka's central bank will review the inflation-target agreement with the government in 2026 as required by the new monetary law. The bank had sought a 5%–7% target previously; there are calls to lower the target and introduce a ceiling to curb currency depreciation and avoid a possible second default.

Sri Lanka's foreign reserves rose to $6.8 billion in December 2025, up $791 million from November after budget support loans from the ADB and IMF; the central bank also provided dollars to the government and repaid some external debt.

Sri Lanka's rupee opened weaker at 310.12/18 per USD (from 310.05/15), while government bond yields opened marginally higher — e.g., the 15.03.2028 bond at 9.13/18% and the 01.07.2030 at 9.75/80%. The ASPI was up 0.98% at 23,521 and the S&P SL20 was up 1.42% at 6,454.

Sri Lanka's official reserve assets rose 13.1% to US$6.825 billion in December 2025 from US$6.034 billion in November, including roughly US$1.4 billion from a PBOC swap arrangement that remains subject to conditionalities.

The Sri Lankan rupee fell to Rs. 310.02 per USD, its weakest level since February 2024. The currency has depreciated 5.6% in 2025 after the vehicle import ban was lifted, with vehicle imports at $281m in November and $1.7bn in the first 11 months of 2025.

Weekly Treasury Bill auction averages rose for a third straight week — 91-day 7.88%, 182-day 8.44%, 364-day 8.47% — with the Rs.100bn auction fully subscribed. Secondary bond yields eased, net liquidity surplus was Rs.158.71bn and USD/LKR closed at 310.05/310.15.

Parliament approved amendments to the Colombo Port City law capping tax holidays at 15 years for billion-dollar investments and imposing shorter, rule-based terms for smaller projects. The law defines investment bands (A $1bn; B $500m; C $100m; D $25m) and offers reduced rates for secondary projects, while officials note currency instability and broader fiscal/IMF policies could still affect investment appetite.

Sri Lanka Customs set a 2026 revenue target of Rs2,207bn, 13.5% below 2025, citing an expected sharp drop in car imports and forecasting Rs266bn from vehicle taxes (69.4% lower than 2025).

Sri Lanka's rupee weakened to 310.05/15 per USD while government bond yields eased on mid‑tenors; the 2028s closed around 9.20-9.27% and the 2029s at about 9.65-9.73%, with the 2026 bond flat at 8.50-8.60%.

USD/LKR spot rate rose above Rs.310 to Rs.310.02 on Jan 7 (CBSL). The CBSL showed dollar buying/selling rates at Rs.306.28/313.81 and said the rupee depreciated 5.6% against the dollar during 2025.

Sri Lanka's rupee weakened to 310.10/20 per US dollar while bond yields opened broadly steady and a 100,000 million rupee T-bill auction was ongoing. Analysts warned central bank dollar purchases could push the rupee down and, if sterilized via deflationary policy, raise energy and food costs.