AGP Executive Report

Fuel & FX Pressure: The rupee slid further to about Rs. 340 per US dollar as diesel demand and global oil costs keep squeezing reserves; the government is weighing options to cut daily diesel use by 500 tonnes, but no specific plan is locked in yet. Policy & Market Sentiment: Harsha de Silva warned more trouble is coming as dollar demand rises with vehicle letters of credit, urging earlier rate action and caution on subsidy cuts and export cess removal. Public Finance Accountability: The “Rebuilding Sri Lanka” fund is reportedly still idle, with officials saying donations sit in a Treasury special account and the statutory fund setup is not completed. Rates & Funding: Treasury bill yields climbed again at an undersubscribed auction, with the 91-day rate up to 9.84% and secondary bond trading staying bearish. Cyber & Consumer Risk: SLCERT flagged 360 online financial fraud cases so far in 2026, including child-related incidents and WhatsApp account hacks. Banking & Payments: Bank of Ceylon installed QR-based digital tills at Kiri Vehera and Kataragama Devalaya; DFCC ONE rolled out new digital features. Business Updates: Janashakthi Finance reported strong Q4 and FY25/26 growth; JAT Holdings posted its highest-ever annual revenue in FY25/26. Trade Headwinds: The US included Sri Lanka among 60 countries in a forced-labour import tax probe, raising fresh concerns for garment exporters. Investment & Cooperation: HNB Investment Bank renewed its CFA Society Sri Lanka sponsorship; Japan-Sri Lanka business environment talks advanced to support FDI goals. Climate Readiness: Sri Lanka Climate Summit 2026 will focus on business readiness for investment and resilience.

US Forced-Labour Tariff Probe Hits Sri Lanka: The U.S. USTR has named Sri Lanka among 60 economies flagged under Section 301 for failing to impose and enforce bans on imports linked to forced labour, with proposed additional duties of 10% or 12.5% depending on each country’s commitments. Fuel Price Pressure in Focus: Sri Lanka’s latest fuel pricing debate continues as the government points to rising global oil costs and subsidy support, while consumers feel the impact at the pump. Rupee Slides Again: The rupee weakened further against the US dollar, with both buying and selling rates rising in the latest Central Bank update. Market Mood Turns Risk-Off: Sri Lankan shares fell for a third straight session, with foreign investors net selling while domestic buyers stepped in. ICT Export Momentum: The Computer Society of Sri Lanka says ICT exports have surged to become the country’s third-largest export earner, signalling a shift toward a digital economy. Education Staffing Push: The PM says approval is in place to recruit 23,000 teachers, aiming to complete hiring by year-end. Trade & Payments Tech: NPCI International and ACLEDA Bank launched cross-border UPI acceptance in Cambodia, highlighting growing regional payment interoperability. Fisheries Jobs Link-Up: Sri Lanka and Japan agreed to create technical employment pathways for Sri Lankan fisheries graduates and deepen fisheries modernization cooperation.

Fuel & Power Policy: Cabinet spokesman Dr. Nalinda Jayatissa says Sri Lanka had to raise fuel prices to avoid supply disruptions as the fuel import bill jumped from $186m (Jan) to $521m (May), with the Treasury absorbing part of the cost via subsidies while government seeks recovery over substandard coal imports. Electricity Billing Confusion: A public warning flags scams and legal confusion after CEB was dissolved and responsibilities shifted to EDL from 10 March, questioning whether consumers should be paying “CEB” bills. IMF Support: Sri Lanka received a $695m IMF tranche after the fifth and sixth EFF reviews, boosting foreign reserves and helping stabilise the rupee. Trade & Investment Outlook: Sri Lanka moves toward RCEP membership as Australia and New Zealand back the bid; separately, Jetstar plans direct Colombo–Australia flights from August. Energy Transition: Sri Lanka is set to commission the country’s largest battery energy storage programme (40MWh systems, up to 10MW discharge) to stabilise the grid and support renewables. Business & Finance: KPMG appoints Sachiru Dayananda as Partner; Exterminators reports a strong FY26 turnaround; Home Lands’ Pentara Residencies piling work is completed. Tourism: SLTDA says arrivals crossed one million in the first five months of 2026 (1,022,022).

IMF Cash Boost & Inflation Watch: The IMF completed its Fifth and Sixth Reviews for Sri Lanka’s EFF, unlocking a US$695m tranche (with inflation still sensitive to fuel costs), while the Central Bank warns inflation could drift toward ~7% if fuel pressure and demand persist. Fuel Pricing Pressure: Retail fuel prices were revised again under the IMF-linked formula, keeping transport and business costs in focus as private bus operators weigh fare relief. Rupee Debate: Commentary renewed calls to “hold the line on the rupee,” warning that political pressure to prop up the currency can drain reserves. Investment & Trade Access: Sri Lanka pushes to stay in the EU GSP+ scheme, but renewal depends on governance, labour and environmental compliance; separately, Western Province Governor Hanif Yusoof met US officials to attract investment in ports, logistics, energy and data centres. Rural Economy Push: The “Praja Shakthi” programme launches 1,000 villages/1,000 projects with Rs. 23bn allocated, including paddy land revival. Food Security & Cooperatives: Rs. 1bn allocated via CWE to improve paddy drying and storage, plus machinery support to cooperatives. Digital Security: Sri Lanka plans a unified national cybersecurity framework to protect digital identity systems and curb identity fraud. Ports & Logistics Reality Check: Trincomalee port ambitions face scrutiny over whether projects have solid commercial demand and feasibility. Sports & Contracts: Sri Lanka Cricket released 2026–27 player contracts (46 players) and the country is set to participate in the NASCO/ITF J30 junior tennis event.

IMF & Inflation Watch: CBSL Governor Nandalal Weerasinghe said recent rate tightening is meant to stop inflation drifting toward 7% as fuel-price pressure and steady demand persist; headline inflation was 5.5% in May. IMF Cash Release: The IMF completed its Fifth and Sixth Reviews, unlocking a $695m tranche for Sri Lanka, bringing total IMF support since 2022 to $2.4bn. Fuel Cost Crunch: Private bus operators plan a key meeting to decide how to respond to rising diesel costs after authorities did not approve an immediate bus-fare revision. Banking & Markets: HNB added three directors to its board from 1 June, while LOLC Holdings reported strong FY26 operating growth and LOLC Finance posted higher FY26 profit, reflecting resilience in finance. Capital Markets: CSE renewed CFA Society Sri Lanka’s Platinum sponsorship for the 9th year, supporting financial literacy and 2026 market awards and training. Digital & Standards: BIMSTEC joined ITU-D as a Sector Member, and IBCSL will lead Sri Lanka’s delegation to a China–South Asia standards conference in Chengdu to cut non-tariff barriers for exporters. Governance & Sports: Sri Lanka Cricket escaped ICC sanctions despite sweeping SLC transformation changes, and SLC released 2026–27 player contracts for a 46-man pool.

IMF Energy Reform Check: The IMF has confirmed Sri Lanka met cost-recovery pricing for both electricity and fuel under its EFF programme, clearing a key condition for the next review. Fuel Price & Cost of Living: CPC says the latest fuel price increase is tied to a Rs. 57bn subsidy allocation ending in June, with prices still below real cost while the government bears losses per litre. Legal/Finance Accountability: Sri Lanka’s Supreme Court set aside a High Court ruling and cleared the way for Public Property Act charges in the 2016 Central Bank bond scam, ordering the case to be expedited. Ports Authority Allegations: A businessman has filed a bribery complaint to the CIABOC over an alleged Rs. 3.2mn Ports Authority fraud, claiming payments to officials linked to the Managing Director’s office. Investor Push: BOI launched a “Ready-to-Invest” digital platform offering pre-structured projects to speed up foreign investment decisions. Exports Up: Sri Lanka logged record monthly export earnings of USD 1.38bn in April, up 6% y/y, with merchandise exports rising to USD 1.06bn. Tourism Deal: Hayleys agreed to sell Maldives resort assets linked to NH Maldives Kuda Rah for USD 17.25m, with an impairment loss recorded. Transport Convenience: The airport–Makumbura luxury bus service has resumed, with fares set at Rs. 410 and a 50-minute trip time. Banking Workplace Award: DFCC Bank was recognised among Sri Lanka’s Top 10 Mom-Inclusive Workplaces for supporting working mothers.

IMF & Reserves: IMF Mission Chief Evan Papageorgiou defended Sri Lanka’s reserve-building model that relies on the Central Bank, but the debate is back as critics warn about liquidity risks and call for Treasury-led reserve purchases. Fuel & Cost of Living: Ceylon Petroleum Corporation raised retail fuel prices again amid West Asia supply pressures, with petrol 92 up to Rs. 434 and diesel to Rs. 407, reigniting inflation worries. Exports: Sri Lanka logged its highest-ever monthly export earnings in April at US$ 1.38bn (+6% YoY), with services adding about US$ 317m and Jan–Apr exports reaching US$ 5.784bn. FDI Push: BOI launched a “Ready-to-Invest” digital platform offering pre-structured projects to speed up foreign investor entry, while Japan also signalled renewed funding through a USD 1.33m grant for Eastern fisheries recovery. Business Finance: First Capital ended FY26 with Rs. 2.1bn profit after tax, and Commercial Bank rolled out 3DS 2.x authentication for UnionPay e-commerce transactions. Labour Policy: Sri Lanka will participate in the ILO conference in Geneva as gig-work protections move toward a possible new international standard. Policy Debate: Cardinal Malcolm Ranjith urged a rethink of the open economic model and questioned continued IMF engagement, while a “Dharma Court” proposal sparked constitutional backlash.

IMF & Fuel Pricing: Sri Lanka raised fuel prices by up to 6% on Sunday after the IMF released a $695m instalment, with petrol up to Rs. 434/litre and diesel to Rs. 407/litre, as Colombo moves to phase out subsidies and meet cost-recovery targets. IMF Programme Update: The IMF approved the combined Fifth and Sixth Reviews under the EFF, unlocking about $695m (SDR 508m) and keeping the reform push on fiscal, electricity-sector and exchange-rate flexibility. FDI Push: The BOI launched the digital “Ready to Invest” platform with $3b+ in investor-ready projects across eight sectors, citing $1.06b FDI inflows in 2025 and projects worth $1.9b ready to start. Infrastructure: President Dissanayake is set to inaugurate Central Expressway Phase II (Rambukkana–Galagedara), with Cabinet-approved contracts worth over Rs. 112b for an 18.65km stretch. Healthcare Investment: Five mammography machines worth Rs. 765m (ADB-funded via HSEP) will be deployed to major hospitals to cut breast-cancer screening delays. Business & Trade Links: German firms flagged Sri Lanka as a strategic Indo-Pacific hub, urging faster reforms and policy consistency to unlock logistics, maritime and renewable energy opportunities. Banking/FX Debate: Free Lawyers alleged CBSL “printed” Rs. 1,653b in 2025 and Rs. 610.7b early-2026 via dollar purchases to build reserves, linking it to rupee volatility.

Digital Public Services: Sri Lanka’s ICT Agency hosted an awareness programme for coordinating executive officers of public institutions under the Government’s Digital Economy Plan, aiming to lift efficiency and service quality. Port Investment & Capacity: SLPA Chairman Dr. Parakrama Dissanayake says Colombo Port is nearing full capacity amid 22% April growth and expects ECT to raise capacity to 14m TEUs, with Hambantota adding 2m TEUs next year; he also flagged up to $2bn in port and logistics investments over 1–3 years via PPPs and new logistics hub plans. IMF Signal for Recovery: The IMF endorsed Sri Lanka’s monetary stance as “broadly appropriate” and approved the Fifth and Sixth reviews, unlocking nearly $700m, while critics warn the approval doesn’t remove deeper economic fragility. State Plantation Assets: Sri Lanka launched the second phase of its State Plantation Asset Programme, offering underutilized plantation lands, tea factories, bungalows and agro-tourism/renewables projects to local and foreign investors across multiple districts. Business & Markets: Dialog Axiata overtook John Keells Holdings to become the most valuable listed company by market cap, while John Keells Holdings reported a 218% profit jump to Rs. 6.31bn for the March 2026 quarter, driven by retail, transport and leisure including NEV deliveries. Investor Climate Push: Germany’s Ambassador Dr. Felix Neumann urged further reforms to improve ease of doing business and public-sector modernisation, saying Sri Lanka’s location can strengthen trade and logistics links if policy consistency improves. Air Connectivity: VietJet Air opened its Colombo office, with Colombo–Ho Chi Minh City services expected from August 2026 (four round trips weekly). Anti-Drug Operations: President Anura Kumara Dissanayake said anti-drug operations have seized 1,947kg of heroin, 2,062kg of “ice” and 289kg of cocaine since Oct 30, warning the scale of trafficking is larger than seizures show.

IMF & Macroeconomy: Sri Lanka received IMF approval for the 5th and 6th reviews, unlocking about US$695m, with the IMF calling the central bank’s monetary stance “broadly appropriate” even after a 100-bp rate hike, while the Ceylon Chamber of Commerce urged continued reform momentum to protect stability and investor confidence. Rupee & Inflation: The rupee saw renewed depreciation pressure against the US dollar, and inflation concerns remain in focus as external shocks and market overreaction are blamed for recent FX moves. State Sector Burden: SriLankan Airlines’ losses and debt are again in the spotlight, with new estimates pointing to large additional funding needs through 2030, raising questions about taxpayer support. Investment Pipeline: Sri Lanka launched the second phase of the State Plantation Asset Programme, offering underutilised plantation lands and assets for investment across multiple districts, including agro-tourism, renewable energy and value-added agriculture. Business Climate & Trade: Germany signalled growing interest in Sri Lanka as a trade and investment partner but stressed reforms and easier business processes; separately, China pushed deeper South Asia trade links via the upcoming China–South Asia Expo. Corporate Moves: Dialog Axiata reclaimed the top spot on the Colombo bourse by market value, overtaking JKH. Aviation & Tourism: VietJet Air opened its Colombo office and flagged a Colombo–Ho Chi Minh City route from August 2026. Environment & Risk: Flamingo deaths in Mannar after collisions with power lines highlighted infrastructure risks for wildlife.

IMF & Debt Outlook: The IMF says Sri Lanka’s debt risks remain elevated but the overall trajectory is improving as reforms and debt restructuring near completion, while it also urges the country to avoid broad import restrictions. FX & Inflation Pressure: The rupee weakened sharply against the US dollar, and inflation is reported to have hit a 27-month high in May, with fuel price impacts in focus. Fuel Pricing Watch: CPC says no fuel price drops are expected in the upcoming revision, even as a large WTI crude shipment has arrived and more crude is due soon. Trade & Business Climate: Ceylon Chamber of Commerce backs continued IMF engagement, calling it key for stability and investor confidence. Court & Politics: Colombo High Court fixed July 7 to start the trial against Namal Rajapaksa in the “Krrish” case, while Basil Rajapaksa faces an arrest order in a separate tourism fund misuse matter. Visa & Tourism: Sri Lanka waived tourist visa fees for nationals of 40 countries under a free ETA scheme (30 days), with applicants still required to obtain the ETA. Finance & Markets: Unit trust industry held steady in April with AUM around Rs. 589bn, and a Rs. 240bn bond auction was fully subscribed in the first phase. Corporate Moves: Expolanka appointed Asok Kumar as Group CEO; Webxpay named Denver Lewis as CEO; Commercial Bank enabled PayPal-linked withdrawals via ComBank Digital. Environment: Flamingo deaths in Mannar after power-line collisions and wetland habitat changes are raising concerns about infrastructure impacts on wildlife.

IMF & Macroeconomy: The IMF says Sri Lanka’s recovery is losing momentum as the Middle East war, higher oil prices and post-cyclone disruptions slow growth, with 2026 growth projected at 3% and inflation/external pressures rising. IMF Funding: The IMF Executive Board completed Sri Lanka’s combined Fifth and Sixth reviews, unlocking about US$695m and bringing total EFF disbursements to around US$2.4bn. Monetary Policy & FX: The IMF mission chief says the rupee is acting as a shock absorber and rejects “uncontrolled money printing,” pointing to low single-digit inflation and CBSL not financing the budget via new money. Fuel & Oil Supply: CPC says fuel prices may not fall at the next revision; it confirmed the arrival of 89,000 tonnes of WTI crude and another 95,000 tonnes of Murban due by May 31. Trade & Ports: SLPA unveiled a US$2bn maritime and logistics investment pipeline to shift Sri Lanka from transshipment to a full logistics hub. Banking & Payments: Commercial Bank enabled PayPal-linked withdrawals via ComBank Digital, targeting freelancers and exporters. Labour & Rights: Amnesty reports forced-labour indicators and serious abuses against Malaiyaha Tamil workers in private tea estates. Food Safety: Sri Lanka tightens food safety rules after an EU warning over pesticide residue concerns. Business & Investment: Pelwatte plans a Rs. 1.86bn liquid milk expansion; Sri Lanka also approved regulations for Sri Lanka–Maldives mutual legal assistance in criminal matters. Essential Services: Essential Services coverage was extended via gazette, including power, health, transport, telecoms and state banks.

IMF Lifeline: The IMF Executive Board approved Sri Lanka’s combined fifth and sixth EFF reviews, unlocking a fresh US$695m tranche, while warning the Iran war and Cyclone Ditwah have pushed risks to the downside and growth is seen slowing to 3%. Monetary Policy: The CBSL’s 100 bps rate hike to 8.75% is said by the IMF to be broadly appropriate, with inflation expected to stay near target as reserves improve. Finance Rules: Fitch says tighter vehicle and gold-backed lending caps will strengthen finance companies’ risk buffers, after LTV limits were cut. SME Pressure: Business groups urge curbs on non-essential imports as the rupee weakens, while another report flags a customs dollar-rate controversy that could raise import costs. Digital Push: Government plans to recruit 400 Digital Champions under PIC-NET to accelerate public-sector digitalisation. Cyber Alert: Police and SLCERT warn of a fake traffic fine scam via SMS/WhatsApp that mimics GovPay to steal card and OTP details. Essential Services: A gazette notification declares key services (power, fuel, water, transport, telecoms, healthcare, banking) as essential post-disaster.

IMF Funding Boost: The IMF Executive Board has completed Sri Lanka’s fifth and sixth EFF reviews, unlocking an immediate SDR 508 million (about US$695m) disbursement, taking total IMF support to roughly US$2.4bn, with the Fund citing continued reform implementation but warning that the Middle East conflict and Cyclone Ditwah risks remain. Monetary Policy Pressure: Analysts say Sri Lanka’s surprise 100-bp rate hike to 8.75% could tip into over-tightening, as policymakers try to protect reserves and inflation without choking credit and growth. FX Calm Signal: CBSL data show the rupee’s sharp rebound after earlier panic, as the central bank moved to restore order in the foreign exchange market. Cyber Scam Alert: Sri Lanka Police warned the public about fake traffic fine notices sent via SMS/WhatsApp that push victims to a counterfeit GovPay-looking website to steal bank and card details. Tea Trade Spotlight: Sri Lanka’s embassy in Korea marked International Tea Day with a Ceylon tea showcase, underlining tea’s role as a major export and cultural brand. Corporate Update: John Keells Holdings reported FY26 momentum with EBITDA up 75% to Rs. 80.01bn and a higher interim dividend, reflecting stronger performance across key businesses. SME & Banking Moves: ComBank expanded digital self-onboarding for account opening, while SLT-MOBITEL’s SmartChat Mega in Kandy highlighted SME-focused digital transformation support. Labour Rights Watch: Amnesty says Malaiyaha Tamil workers in private tea estates face abuses meeting forced-labour indicators, urging stronger state enforcement.

IMF Funding Unlock: The IMF Executive Board is set to decide on Sri Lanka’s Fifth and Sixth EFF reviews today, which could release about US$700m and keep the programme on track. Monetary Tightening: Sri Lanka’s Central Bank raised the policy rate by 100 bps to 8.75%, aiming to curb inflation and defend the rupee amid energy-cost pressure linked to the Iran conflict. IMF Disbursement Confirmed: The IMF has completed the combined reviews, unlocking SDR508m (about US$695m) and bringing total disbursements to roughly US$2.4bn under the bailout. Rupee Accountability Push: Opposition MPs want a select committee to examine recent rupee swings and to increase oversight of the Central Bank. Energy Security Move: The government is advancing the “Surakimu Lanka” national energy security mission to cut fuel import burden and strengthen supply. Trade & Business: Customs arrested two Chinese nationals at BIA for alleged cigarette smuggling worth about Rs. 75.3m. Diplomacy: Foreign Minister Vijitha Herath began an official visit to New Zealand, receiving a traditional Maori “Powhiri” welcome and holding talks on trade and cooperation. De-mining Support: Japan extended about US$1.34m for humanitarian demining in Sri Lanka’s North and East.

Monetary Shock: Sri Lanka’s central bank jolted markets with a full 100 bps rate hike to 8.75% as Iran-war oil pressure feeds inflation and rupee weakness. Fuel Calm, Pricing Watch: CPC says fuel stocks are sufficient until November (and at least through July), with LCs already opened and shipments due, while a May 31 price revision is being discussed—no panic queues expected. IMF Next Step: The IMF Executive Board will decide today on Sri Lanka’s 5th and 6th EFF reviews, potentially unlocking about $700m. Energy Security Push: Cabinet approved “Surakimu Lanka” to cut fuel import burden and improve resilience via demand management and efficiency. Customs Crackdown: Two Chinese passengers were arrested at BIA for smuggling 251 cartons (50,200 cigarettes) worth about Rs. 75.3m. Fraud & Safety: Banks’ association reiterated deposits are safe after recent fraud/cyber incidents. Trade & Travel: Sri Lanka scrapped the $50 ETA fee for visitors from 40 countries, and Sri Lanka–New Zealand ties got a boost with Foreign Minister Vijitha Herath’s talks and a Māori pōwhiri welcome.