AGP Executive Report

Investment: Sri Lanka expects to recover the Rs. 9.7 billion spent developing Colombo Port City when it leases its first state-owned land parcel; seven private plots have already been leased, clearing the way to market the government site. IMF and Markets: The IMF says the economy has improved and fiscal performance is strong, and stands ready to support Sri Lanka. Its board is expected to consider the latest review, which could unlock about $345 million. Trade and Partnerships: Foreign Minister Vijitha Herath met Azerbaijan’s President in Baku to discuss cooperation in trade, investment, tourism and energy, including oil and gas. Digital Economy: The government is seeking China’s support for a national AI computing centre, while Digital Summit Asia set a goal of $5 billion in digital exports by 2030. Clean Energy: Sigenergy has launched in Sri Lanka, offering smart energy systems for homes and businesses. Public Finance: Treasury bill yields were mostly steady, but the auction raised only Rs. 66.13 billion of the Rs. 80 billion offered.

Revenue and Exports: Sri Lanka Customs beat its 2026 target early, collecting Rs. 2,208 billion by October 13. First-half exports also topped US$9 billion, while the Government targets a US$15 billion digital economy by 2030. Budget and Investment: The Treasury says Budget 2027 will focus on reforms, not tax cuts, as the President signals a strong rural-economy push. He also expects legislation on state-owned enterprises and public-private partnerships to move ahead soon. Credit Access: Namal Rajapaksa has proposed a second-chance loan scheme for entrepreneurs who have repaid past debts but still struggle to borrow because of credit records. Business Risks: More than a third of listed firms cannot cover interest costs, the Central Bank says. Private borrowing also fell to Rs. 106 billion in August, its lowest level in four months. Economic Outlook: The IMF projects 4% growth in 2026, but warns that energy shocks and El Niño could threaten the recovery. The Central Bank says Sri Lanka is confident it can avoid a return to the FATF grey list as international assessors begin a two-week review.

Digital Economy: SLT-Mobitel has launched a token-based AI platform with Sinhala and Tamil support, offering 10,000 credits for Rs. 749. Recovery Risks: The Central Bank warns severe El Niño conditions could threaten Sri Lanka’s fragile recovery; the IMF forecasts 4% growth in 2026, while inflation reached 8% in August after an oil-price shock. Investment Delivery: President Anura Kumara Dissanayake says procurement reforms are planned to speed public investment. Less than 30% of this year’s capital budget had been spent by the end of September, despite plans to raise next year’s allocation to about Rs. 2 trillion. Business Strain: 37.7% of listed non-financial companies could not cover interest costs in the first half of 2026, even as revenue rose 22%. Private-sector bank lending grew by Rs. 105.7 billion in August, its smallest monthly increase since April. Tourism and Exports: Visitor arrivals hit a record 2.36 million in 2025, but tourism earnings rose just 1.6% to US$3.22 billion. Yaden Laboratories became the first Sri Lankan pharmaceutical manufacturer to exhibit at CPHI Europe, raising the country’s profile in global supply chains.

Investment Push: Sri Lanka’s economic summit drew more than 800 delegates as President Anura Kumara Dissanayake urged investors to back the country and pledged faster procurement, new business laws and about Rs. 2 trillion in capital spending. Less than 30% of this year’s capital budget had been spent by the end of September. Infrastructure Finance: Cabinet approved a US$100 million ADB loan for water reforms, while the government plans to tender four power transmission lines to private investors. Growth Outlook: The IMF forecasts growth slowing to 4% this year and 3.7% in 2027, with inflation rising to 5.3% as energy costs climb. The government is weighing a new IMF arrangement focused on growth while preserving stability. Digital Economy: Sri Lanka aims to raise the digital sector’s share of GDP to 12% by 2030, but officials warn AI threatens service exports and talent is leaving. Economic Risks: The Central Bank cautioned that El Niño could disrupt recovery and flagged risks from rapid vehicle and gold-backed lending.

IMF and Growth: President Anura Kumara Dissanayake says Sri Lanka is open to a growth-focused IMF deal after its current programme ends in March 2027, while prioritising stability and stronger reserves. Investment Push: At the Colombo investment summit, he pledged stronger investor protections and more private-sector involvement, including possible private management of the East Container Terminal while the State retains ownership. Export Drive: The Export Development Board says a new plan aligns 32 State institutions behind 130 actions, targeting higher-value exports and wider trade access. Property Market: Colombo apartment prices rose 3.2% year-on-year in the second quarter, but sales fell 6.7%, with buyers shifting towards units above Rs. 50 million. Business Investment: Dipped Products has opened a Rs. 4.2 billion Katunayake glove plant to expand value-added exports. Markets: Bond yields held broadly steady ahead of a Rs. 100 billion Treasury bond auction.

Fuel Supply: The Energy Minister says there is no imminent shortage as state fuel supplier CEYPETCO raises its market share to 80% amid reduced deliveries from private distributors. President Anura Kumara Dissanayake says private fuel agreements will be revised to give the government more control. Remittances: Workers sent home US$6.87 billion in the first nine months of 2026, up US$1.05 billion year on year, strengthening a key source of foreign exchange. Corporate Health: The Central Bank says more than a third of listed firms cannot cover interest bills, while warning that vehicle and gold-backed lending is growing quickly. Trade and Investment: A U.S. mission led by Montana Governor Greg Gianforte explored opportunities in food exports, minerals and manufacturing as Washington seeks to narrow its trade gap with Sri Lanka. Solar Investment: Industry advocates warn proposed changes to rooftop-solar payment schemes could undermine private investment and jobs, arguing grid upgrades and storage should come first. Startups: Hatch and First Capital are developing a Rs. 3 billion fund to help Sri Lankan startups expand regionally.

IMF Engagement: Sri Lanka’s finance delegation is joining the IMF and World Bank meetings in Bangkok, where discussions will cover economic stability and the country’s transformation plans. Financial Conditions: CBSL renewed the $750,000 cap on company investments abroad for six months, while aiming to phase out crisis-era restrictions by end-2027. Money-market liquidity rose to Rs.399.1 billion, its highest level since mid-March. Energy Investment: Power firms reportedly lost Rs.15.8 billion due to substandard coal. Separately, a 10MW battery storage facility commissioned in Galle marks a new step for energy infrastructure, with Pan Asia Bank providing financing. Trade and Competitiveness: The Government is targeting $36 billion in export earnings by 2030, with chambers urging stronger coordination and regulatory readiness. Business leaders also warn that lengthy container clearance is raising costs and weakening investor confidence.

Fuel Supply: Energy Minister Anura Karunathilaka warned private distributors of legal action if they restrict fuel supplies to pressure the government over prices. Remittances: Overseas workers sent $6.86 billion in the first nine months of 2026, up $1.05 billion year on year; September inflows reached $734.4 million. Power Costs: Substandard coal caused an estimated Rs. 15.765 billion in losses for state electricity bodies in 2025 and 2026, while a presidential commission investigates procurement. Households and Credit: A BCG study found about 400,000 households had slipped into lower-income groups since 2020, even as average monthly income rose in nominal terms. Banks are also missing a large pool of consumer demand, with lending concentrated among affluent urban households. Economic Outlook: Sri Lanka is forecast to grow 4% this year, while inflation stood at 8% in September. The IMF and government are discussing a new long-term, growth-focused programme after March 2027. Energy and Investment: The fuel import bill has surged 62% as the energy crisis deepens, while Sri Lanka is pitching Mannar oil and gas blocks to international investors.

Remittances: Sri Lanka received $6.86 billion from overseas workers in the first nine months of 2026, up $1.05 billion year on year; September inflows reached $734.4 million. Monetary Policy: The Central Bank is sticking with its 5% inflation target through October 2029, arguing a tougher target could constrain growth. Growth and Households: The World Bank raised its 2026 growth forecast to 4.4%, but says two in five Sri Lankans remain poor or vulnerable. Energy: The fuel import bill has surged 62% as pressure on energy supplies grows. Colombo is also pitching Mannar Basin oil and gas blocks to international investors, a potential new source of investment and energy. Banking Governance: A final audit has put losses in the NDB fraud case at Rs. 13.6 billion, intensifying scrutiny of the bank’s board and auditors. IMF and Trade: Sri Lanka is in talks with the IMF on a longer-term, growth-focused programme after March 2027, while calls grow for digital-trade provisions in future trade deals.

Monetary Policy: The Central Bank defended its 5% inflation target through October 2029, saying a lower target could constrain growth. Growth Outlook: The ADB forecasts 4% growth for Sri Lanka in 2026, ranking it 18th among Asia’s fastest-growing economies. Trade and Investment: India and the US are exploring joint investment in ports and digital infrastructure across the Indian Ocean, including Sri Lanka. Separately, Montana Governor Greg Gianforte’s trade mission explored opportunities in agriculture, industrial hemp, advanced manufacturing and Sri Lankan graphite. Tourism: An Indian investor urged Sri Lanka to launch a dedicated campaign in India and restore Colombo–Kolkata flights, arguing the market could help lift arrivals and visitor spending. IMF Talks: Sri Lanka is discussing a possible long-term, growth-focused programme after its current IMF arrangement ends in March 2027.

Digital Trade: ODI Global urges Sri Lanka to include enforceable rules on e-commerce, data flows and e-signatures in future trade deals; its survey found 70% of exporters already sell online. Energy Investment: The Government is pitching four Mannar Basin oil and gas blocks, covering 33,964 sq km, to global investors, with bids due in February 2027. Banking Governance: Scrutiny of NDB’s Rs. 13.6 billion fraud is intensifying, with the audit regulator’s findings due within two weeks. CBSL says deposits and financial stability are unaffected. Growth and Households: The World Bank raised its 2026 growth forecast to 4.4%, but says recovery remains uneven, with two in five Sri Lankans poor or vulnerable. Business and Tourism: Boston Consulting Group sees growing demand for its services and identifies finance, agriculture, tourism, logistics and apparel as growth sectors. The Government has also begun a five-year tourism branding campaign, with Rs. 930 million allocated for 2026.

Northern Investment: The BOI plans to open investor reservations for the Paranthan Export Processing Zone by November, with infrastructure work at Paranthan and Kankesanthurai set to begin in January. Markets: Sri Lankan shares rose 0.41% on Friday to 20,316.91, led by utilities, though turnover fell and foreign investors were net sellers. Banking: Seylan Bank says its assets topped Rs. 1 trillion in September, making it the fourth private bank to reach the milestone. Consumer Spending: A BCG survey found 77% of consumers expect spending to rise over the next six months, but only 38% expect higher incomes, pointing to continued pressure on household budgets. Economic Outlook: The government is discussing a new long-term, growth-focused IMF arrangement after March 2027. Energy and Governance: The fuel import bill has reportedly surged 62% as supply pressures deepen, while a parliamentary committee puts losses linked to the coal controversy at Rs. 17.965 billion.

Treasury Market: T-bill yields edged up 1 basis point on 91-day bills and 3 points on 182-day bills; the 364-day rate held at 9.95%. The Government raised the full Rs. 80 billion on offer. Financial Stability: Global risks now top the Central Bank’s concerns, making up 26% of risks cited in its latest survey, nearly double the share six months earlier, though confidence in the financial system improved. Banking Governance: NDB’s final audit puts fraud-related losses at Rs. 13.64 billion over 2016–26, highlighting serious oversight failures; the bank says customer accounts were not affected. Energy Costs: Fuel imports cost Sri Lanka US$4.07 billion in the first eight months of 2026, up 61.6% year on year and adding pressure to foreign exchange and domestic prices. IMF Strategy: The Government says talks are under way on a growth-focused arrangement after the current IMF programme ends in March 2027. Credit Access: A BCG study finds borrowing remains concentrated among wealthier households: only 19% of consumers have credit cards, pointing to room to broaden access to financing.

IMF Outlook: Sri Lanka is discussing a successor programme as its current IMF deal is expected to end in March 2027, with the Government seeking a shift from crisis support to long-term growth. Digital Business: LOLC Finance’s iPay Business has launched a digital payments and business-services platform for merchants, while a new survey found about 70% of surveyed exporters already use e-commerce — though payments, paperwork and delivery remain hurdles. Markets and Prices: The Colombo market fell 1.4% on Thursday, led by IT and utilities shares, as September inflation remained at 8%. Household Recovery: Poverty has eased from its 2023 peak but remains well above pre-crisis levels: the World Bank estimates 16.9% of Sri Lankans were poor in 2025 and projects 15.8% in 2026. Trade: Sri Lanka’s first dedicated Ceylon Tea pavilion at the Saudi Food Show sought to build on a 15% rise in exports to Saudi Arabia compared with 2024.

Prices and Growth: Sri Lanka’s headline inflation held at 8% in September, while GDP grew 4.2% in the second quarter, according to Central Bank data. Financial Crime: The FCID arrested a 25-year-old man accused of transferring US$25 million abroad through fictitious companies and fake import orders between 2024 and 2025. Markets and Funding: Bond yields edged up as trading picked up; a staff-level IMF agreement on the seventh review could unlock US$345 million in funding, subject to approval. Recovery Outlook: The World Bank raised its 2026 growth forecast to 4.4%, but warned that two in five Sri Lankans remain poor or vulnerable despite the recovery. External Pressures: Fuel imports cost Sri Lanka US$4.07 billion in the first eight months, up more than 60% year on year, underscoring the pressure on the country’s external finances.

Recovery & Poverty: The World Bank raised Sri Lanka’s 2026 growth forecast to 4.4% and says the economy has returned to pre-crisis levels, but two in five people remain poor or vulnerable. Markets: The rupee weakened against the US dollar and bond yields edged up as trading picked up, with an Rs. 80 billion Treasury bill auction in focus. Trade & Energy: Colombo port container volumes rose 10% in the first eight months, while fuel imports cost US$4.07 billion; reports of fuel shortages and queues persist despite the CPC chairman saying there is no shortage. Policy & Investment: An economic census will cover agriculture and businesses in 2026–27, while CMA Sri Lanka has submitted Budget 2027 proposals. Sri Lanka also secured US$57.4 million for rooftop solar and virtual net metering. Public Accountability: Shiranthi Rajapaksa was arrested and remanded over allegations that Rs. 10 million donated by a state bank to her charity for a children’s hospital scanner was misused.