News & market updates

Sri Lanka's current account posted a US$194m deficit in May 2026, the second consecutive monthly deficit, driven by a wider trade gap and a smaller services surplus despite higher remittances. The cumulative trade deficit reached US$4.7bn Jan–May 2026, fuel imports rose 112% YoY in May, and gross official reserves were US$6.9bn at end-May.

The IMF said the Seventh Review of Sri Lanka's Extended Fund Facility will assess program performance and place greater emphasis on growth-oriented reforms, including fiscal, monetary and governance measures and energy pricing. Only the Seventh and Eighth reviews remain and the IMF will continue policy advice and technical assistance.

IMF welcomed Sri Lanka's broad-based revenue gains and reiterated that energy pricing reforms and public finance measures remain central to the EFF program, noting on-budget transfers are considered in cost-recovery assessments and work on electricity tariff methodology and tax registry reforms is ongoing.

IMF mission chief Evan Papargeorgiou urged Sri Lanka to 'stay the course' and sustain reform momentum after staff-level talks, saying the IMF has relaxed some EFF targets as fuel prices rose about 50% and monetary tightening may slow growth. He noted authorities have delayed reforms at loss-making SOEs including SriLankan Airlines, Ceylon Petroleum Corporation and Ceylon Electricity Board.

Sri Lanka's inflation rose to 6.8% in June 2026, the highest since June 2023 and close to the Central Bank's 7% upper target. The rise was driven by a ~47% fuel price hike and higher food and transport costs; the Central Bank raised its policy rate by 100bp.

Colombo headline inflation rose to 6.8% Y-o-Y in June 2026 (from 5.5% in May), with a 2.1% month-on-month increase driven by food (fish, vegetables) and non-food items amid energy price pass-through. The Central Bank projects inflation to remain above the 5% target near term before easing, with elevated uncertainty due to Middle East tensions.

IMF staff completed a June 24–30 visit, noting inflation rose from 1.6% y/y in Feb to 5.5% y/y in May after energy price increases and that authorities responded with a 100 bps policy rate hike and temporary on-budget relief (fuel, electricity, fertilizer, cash transfers). The IMF said sustaining reforms is critical and the Seventh Review of the EFF will assess program progress in the fall.

Sri Lanka's CCPI rose to 5.5% in May (from 5.4% in April), driven partly by higher local energy costs, eroding real returns on typical savings. Wealth managers recommend diversifying into unit trusts (money-market, income/balanced and equity funds) to protect savings.

Ceylon Petroleum Corporation cut Auto Diesel by Rs.25 to Rs.382 per litre and 92 Octane Petrol by Rs.20 to Rs.414 per litre with effect from midnight; Super Diesel, 95 Octane Petrol and Kerosene prices remain unchanged at Rs.478, Rs.478 and Rs.285 respectively.

Asian stocks closed a strong quarter — Japan's Nikkei is set for a ~36% quarterly rise and South Korea's KOSPI about 65% — as a resurgent dollar (index +1.3% this quarter) pushed the yen to a four-decade low of 162.41 and sent gold sharply lower; Brent crude at $72.49/bbl.

Sri Lanka cut fuel prices effective June 30: Auto Diesel down Rs25 to Rs382/litre and Octane 92 down Rs20 to Rs414. Prices had risen sharply since Feb, driving up transport and grocery costs and pressuring retailers and logistics.

The LMD-PEPPERCUBE Business Confidence Index fell 16 points to 132 in June, marking a 20-month low. The drop accompanies a 7.8% year-to-date rupee depreciation, fuel price hikes, central bank forex interventions (over US$223m sold in May) and elevated inflation risks.

Colombo Crimes Division seized suspected counterfeit Caltex and Delo engine oil from two retailers (SF Marketing in Mawanella and J.W. Auto in Kegalle) during raids on 2 June 2026; the matters are before Mawanella and Kegalle Magistrate’s Courts and the accused were granted Rs. 10 million surety bail. Authorities say counterfeit lubricants risk engine damage, increased emissions and environmental harm, and investigations are ongoing.

Deputy Finance Minister Anil Jayantha said Sri Lanka cannot cut domestic fuel prices despite a fall in global oil prices because existing term tenders lock in future deliveries and pricing. He noted term contracts base shipments on earlier months' prices and recalled fuel prices have risen about 50% since Feb 28.

Asian shares pulled back after Apple raised iPad and MacBook prices (Apple shares slid 6.1%), denting chip stocks and sending MSCI’s Asia‑Pacific ex‑Japan index down 3.8%; the yen hovered near 40‑year lows and Brent crude fell to $73.9/bbl.

Asian equities surged after strong Micron and Qualcomm earnings eased AI-related worries, lifting MSCI Asia-Pacific ex-Japan about 1.6% with Japan's Nikkei >4% and South Korea's KOSPI +5.5%. Oil fell to roughly $72.5/bbl and gold slid below $4,000 amid a firmer dollar and lingering rate-hike expectations.

Oil prices fell as Middle East supply expectations rose, with August Brent down $1.22 to $72.52/bl and WTI down $1.02 to $69.32, hitting their lowest since Feb. 27. Reopening of the Strait of Hormuz and expected Iranian exports eased supply concerns despite low U.S. crude stocks.

Colombo Stock Exchange indices rose, with the ASPI up 0.37% (82.93 pts) to 22,291.51 and the S&P SL20 up 0.56% to 6,216.28. Top contributors included John Keells, Windforce, Ceylon Grain Elevators and Sampath Bank; market turnover was LKR110.3m, led by materials (LKR60.4m), while Brent crude fell below $73/bbl.

Fitch Ratings says US consumer spending growth is slowing as inflation erodes real incomes, with real spending easing to 1.4% qoq annualized in 1Q26 and Fitch forecasting 1.7% growth for 2026. Lower oil prices could ease the squeeze, but falling savings and rising auto and credit-card delinquencies point to uneven spending.

Sri Lanka's goods and services exports rose 18.3% year-on-year in May to US$1,570.6 million, with merchandise at US$1,223.5m and services US$347.2m. The EDB reported estimated export earnings of US$7,393.4m (+7.6% YTD) and launched the NEDP 2026–2030.

Asian stocks wobbled after a global tech- and semiconductor-led selloff, with MSCI’s Asia-Pacific ex-Japan index down 0.02%. Market caution was driven by concerns about higher interest rates (Fed/BoJ), falls in oil and gold, and volatility around currencies and tech sector valuations.

Headline NCPI inflation rose to 5.4% YoY in May from 4.7% in April, the third consecutive monthly increase. Rises were driven by higher petrol and LP gas prices and increases in several food items (vegetables, fish, onions), while rice, eggs and sugar eased; core inflation edged to 4.5%.

Rs.70bn Treasury Bill auction scheduled today (Rs.35bn 91-day, Rs.25bn 182-day, Rs.10bn 364-day); secondary bond yields traded mixed with the short end marginally lower and medium maturities slightly higher. Call money 9.21%, repo 9.24%, USD/LKR ~335.00/335.50.

Oil prices fell about 1–1.4% as signs of restored crude flows through the Strait of Hormuz after U.S.-Iran talks eased supply concerns; Brent dropped to $76.81/bbl and WTI to $72.99/bbl.

Colombo Stock Exchange closed flat, with the ASPI up 0.01% at 22,256.49 and the S&P SL20 down 0.03% at 6,193.65. Top positives were LB Finance, National Development Bank, Aitken Spence and Nawaloka; declines came from Melstacorp, Central Finance, Sunshine and Windforce; turnover Rs 1.56bn.

Asian markets rose after Iranian and US negotiators reported progress in peace talks, helping Brent crude drop 1.9% to $79.01/bbl; at the same time a hawkish Federal Reserve outlook kept Treasury yields and the dollar firm, keeping rate risks prominent.

Secondary bond market rallied, driving yields sharply lower across the curve and prompting a drop in T‑bill auction rates — the 91-day yield fell to 10.02% and the 182-day to 10.16%. Foreign holdings of rupee government securities rose marginally to Rs. 121.35 billion and money-market liquidity narrowed to Rs. 31.25 billion.

US dollar eased ahead of the US PCE inflation print after the Fed left rates unchanged at 3.50%-3.75% and removed guidance on additional rate moves; the DXY trades near 100.70 after a 13‑month high, with markets also watching global PMIs, oil and gold.

Deputy Minister Chathuranga Abeysinghe said Sri Lanka can reach $36bn in exports under the National Export Development Plan if urgent reforms, strategic FDI and lower energy costs are delivered. The government will prioritise digitalisation, trade facilitation, supply‑chain improvements and value addition, with focus on plantations while warning of acute skills shortages.

Colombo Stock Exchange ASPI fell 0.25% to 22,305.37 (down 55.94 pts) while the S&P SL20 dropped 0.30% to 6,196.50. Market turnover was Rs 423.9m, led by insurance at Rs 135.1m; NDB, Sampath and Lion Brewery were top gainers while Hayleys, Aitken Spence, Haycarb and LOLC led losses.