News & market updates

IMF Sri Lanka mission chief Evan Papageorgiou said Sri Lanka should restore cost-recovery electricity pricing promptly to minimise fiscal risk and meet prior actions for the EFF fourth review; approval would unlock SDR254m (≈US$344m), raising disbursed support to SDR1,270m (≈US$1,722m).

IMF mission chief said the IMF executive board review of Sri Lanka’s bailout program is likely in June conditional on a power tariff adjustment. He urged authorities to hike electricity prices to stop CEB losses and noted engagement with US officials on export tariff concerns.

Sri Lanka's Cabinet has appointed a four-member committee to review a draft 'State Commercial Enterprises Management Draft Bill' to depoliticize SOEs and install professional boards. The reform, aimed at over 400 SOEs including SriLankan Airlines, CPC and CEB, is tied to IMF-driven fiscal and efficiency measures.

China and Pakistan renewed their all-weather strategic partnership in Beijing, agreeing to advance and upgrade CPEC infrastructure — including phased ML-1 rail works, the Karakoram Highway, Gwadar Port and the new Gwadar International Airport — and to encourage Chinese investment in mining and offshore oil/gas. They also committed to counter-terrorism cooperation, power-system exchanges and a green-economy approach to Belt & Road projects.

S&P reports the global Islamic finance industry grew 10.6% in 2024 and sukuk outstanding topped $1 trillion, and expects continued growth in 2025 amid evolving sukuk regulation (Sharia Standard 62) and macro uncertainty. It forecasts $10–12bn in sustainable issuance for 2025 and warns that a drop in oil prices could curb growth in core Islamic economies.

IMF staff reached a staff-level agreement on the Fourth Review of Sri Lanka’s Extended Fund Facility, which would allow access to about US$344 million pending Executive Board approval and completion of prior actions. The release is conditional on restoring cost-recovery electricity pricing and completing a financing assurances review amid improving reserves and growth but external risks.

IMF staff reached agreement on Sri Lanka's fourth EFF review, conditional on restoring cost-recovery electricity tariffs and completing financing assurances; IMF board approval would unlock about US$344m in funding.

Sri Lanka will begin talks next month with India and the UAE to develop an energy hub in Trincomalee including a multi-product pipeline, bunkering facilities and a potential refinery. State-run Ceylon Petroleum, Indian Oil and AD Ports will meet in late May to draft the business plan.

UAE Deputy PM Abdullah Bin Zayed Al Nahyan pledged UAE support to promote energy, tourism, foreign investment and foreign employment in Sri Lanka during an official visit and welcomed a trilateral MOU for Trincomalee as an energy hub. A UAE–Sri Lanka Joint Business Council MOU was also signed to boost business cooperation.

President Trump intensified pressure on Fed Chair Jerome Powell to cut interest rates while pursuing unilateral tariffs, as US stocks fell and bond yields stayed elevated. The article warns tariffs could raise inflation and slow growth, drawing a parallel with Sri Lanka's 2004 anti-globalization measures.

Colombo bourse opened marginally negative as the ASPI fell 17 points (0.11%) to 15,600 on low turnover of Rs.1.16bn. Banking stocks led turnover (24% share) while HAYL, LION, JKH, DIPD and TJL were top negative contributors and Sampath and Lanka IOC drew buying interest.

Asian equities and U.S. futures fell and the dollar slid after President Trump publicly attacked the Fed and considered firing Chair Powell; safe-haven gold hit a record $3,370.17/oz while Brent crude fell to $66.77/bbl.

The IRD confirmed VAT exemption for locally produced liquid milk and yoghurt effective 11 April for products with at least 50% locally sourced fresh milk. VAT was also removed on naphtha supplied by CPC to the CEB for power generation.

IMF lauded Sri Lanka’s EFF-supported recovery — 5% growth in 2024, inflation 2.6% (end‑Mar 2025) and gross official reserves of $6.5bn — but warned that global uncertainty, fiscal constraints and unfinished reforms could threaten gains. It urged sustained fiscal discipline, improved VAT processes and restoring cost‑recovery electricity pricing.

The ECB cut its deposit rate by 25 basis points to 2.25% (its seventh cut in a year) to support a slowing euro‑area economy hit by U.S. tariffs. The bank removed language calling rates "restrictive" and cited trade‑policy uncertainty, with energy prices down and the euro firmer.

US President Donald Trump slammed Fed Chair Jerome Powell for not cutting interest rates and threatened his termination, urging immediate rate cuts. Powell said the economy appeared to be slowing and that tariffs have raised inflation expectations and uncertainty.

Sri Lanka will charge VAT on services supplied by non-resident persons through electronic platforms from October 1, 2025. Procedures will be specified later; exemptions/changes include naphtha supply from CPC to the CEB, zero-rating of certain milk/yoghurt, and mandatory VAT registration for all commercial importers/exporters.

Small Hydro Power Developers Association says the CEB ordered shutdown of small hydropower plants from 11 April, affecting nearly 450MW and causing a loss of about 1.8 million units daily. SHPDA warns CEB must buy costlier thermal power (>Rs.50/unit vs Rs.10) costing ~Rs.70m/day and demands compensation and government intervention.

The IRD exempted locally produced liquid milk and yogurt from VAT effective April 11, removed VAT on CPC-supplied naphtha to the CEB, and will impose VAT from Oct 1 on digital services supplied to Sri Lankan consumers by non-residents. To qualify, liquid milk must contain at least 50% fresh milk, and commercial importers/exporters must register under the updated VAT rules.

Vietnam's Ministry of Industry and Trade revised renewable power purchase tariffs and introduced a battery tariff, capping ground-mounted solar at about 3.9¢/kWh in the South (~LKR11.67) and 5.4¢/kWh in the North (~LKR15.95), with ground+battery caps at 4.5–6.1¢/kWh and batteries required at 10% of capacity. A price for LNG combined-cycle was also set, effective April 2025.

Fitch Ratings warned that higher US tariffs will weigh on APAC sovereign credit metrics and could hurt Sri Lanka (CCC+) if export earnings fall, reserves are used to defend the currency and external buffers weaken; slower global growth and commodity moves could amplify the impact.

State-run Ceylon Electricity Board shut a coal plant from April 11 and relied on up to 1,500 MW of rooftop solar during the New Year holiday to maintain supply. Two coal units ran at minimum and large hydro provided inertia, with no oil-fired plants operating in daytime after April 12.

Sri Lanka is considering energy imports and tariff reforms to address a 44% tariff imposed by US President Donald Trump, Deputy Economic Minister Anil Jayantha said. Virtual meetings with US officials have taken place and the Treasury has submitted documents to the USTR and White House as talks continue on sending a negotiation mission.

The Ceylon Electricity Board has signed a PPA for the 350 MW Sahasdanavi R-LNG combined-cycle power plant, to be built, owned and operated by Sahasdanavi Co. Ltd; open-cycle supply to the grid is expected within 30 months and full combined-cycle in a further 12 months, with generation cost about Rs 37/unit after conversion.

IMF staff concluded a Colombo visit, saying Sri Lanka's IMF-supported EFF is delivering but global uncertainty means more time is needed to assess a recent external shock; gross official reserves rose to US$6.5bn and inflation was −2.6% at end‑March 2025.

The IMF said concluding a staff-level agreement for Sri Lanka’s next EFF review will take more time due to recent external shocks and uncertainty. It noted reserves of US$6.5 billion and inflation at -2.6% and urged restoring cost-recovery electricity pricing and tightening tax exemptions.

US consumer inflation fell 0.1% in March 2025, leaving 12-month inflation at 2.4%. Energy costs declined 3.3% while food rose 0.4%; the Fed is waiting for the index to ease before cutting rates.

President Trump paused the newly imposed tariffs on dozens of countries but immediately raised tariffs on Chinese imports to 125%, triggering a global market rally and a drop in oil prices.

Sri Lanka has greenlit a nearly US$4 billion Hambantota oil refinery funded by China's Sinopec, planned to process about 200,000 barrels per day to become a regional refining and transshipment hub. The project could cut refined-fuel imports, save foreign exchange and enable exports while raising geopolitical, regulatory and environmental risks.

ADB forecasts Sri Lanka to grow 3.9% in 2025 and 3.4% in 2026 after a strong 2024 rebound. The report says the recovery remains fragile — public debt vulnerability is high (below 95% only by 2032), with risks from US tariffs, reform slippage and macro policy setbacks.