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Sunday October 11th, 2026

Fitch confirms Sri Lanka Insurance Corp at ‘BB-‘/Stable

ECONOMYNEXT – Fitch Ratings has confirmed Sri Lanka Insurance Corporation Limited’s (SLIC) Insurer Financial Strength rating (IFS) at ‘BB-‘ with a Stable Outlook.

The agency has also affirmed the National Insurer Financial Strength Rating and National Long-Term Rating at ‘AA(lka)’ with Stable Outlook, a statement said.

“SLIC’s ratings reflect its well-established franchise and market position in Sri Lanka, 99.9% state ownership, and its importance to the government as the largest state-owned insurer.”

The full rating report follows:

Fitch Ratings-Colombo-30 September 2015: Fitch Ratings has affirmed Sri Lanka Insurance Corporation Limited’s (SLIC) Insurer Financial Strength rating (IFS) at ‘BB-‘ with a Stable Outlook. The agency has also affirmed the National Insurer Financial Strength Rating and National Long-Term Rating at ‘AA(lka)’ with Stable Outlook.

KEY RATING DRIVERS

SLIC’s ratings reflect its well-established franchise and market position in Sri Lanka, 99.9% state ownership, and its importance to the government as the largest state-owned insurer.

SLIC’s profit retention dropped to 38% in 2014 (2013: 78%) due to higher dividends to the government. In 2014, total comprehensive income increased to LKR14.9bn (2013: LKR7.5bn) driven mainly by fair-value gains in available-for-sale financial assets (LKR11.2bn in 2014 and LKR2.8bn in 2013). Net profit in the non-life segment dropped to LKR1.65bn in 2014 (2013: 2.9bn) due to poor underwriting results. This stemmed mainly from a one-time increase in provisions for third-party motor claims.

SLIC’s total premiums fell to LKR20.7bn in 2014 from LKR21.35bn in 2013 with the gross written premiums (GWP) in both life and non-life declining slightly. The non-life business’s combined ratio deteriorated in 2014 due to higher reserving for third-party motor claims and the competitive environment.

SLIC has significant investments in non-core subsidiaries that have been made in line with government policy and a high proportion of equities in its investment portfolio, which weaken SLIC’s risk-based capital (RBC). The company is also exposed to high interest rate risk due to the asset and liability mismatches in the life business, which stem from the limited availability of long-term investments in the market. The company is in discussions with the regulator on separating its life and non-life businesses to comply with new regulatory requirements.

SLIC’s regulatory solvency ratio at end-June 2015 was 13.6x (end-2013:11.5x) for life and 3.4x (end-2013: 4.9x) for non-life. These ratios are well above the regulatory required ratio of 1x for each business and compare well against that of its peers. RBC, which takes into account the high exposure to equity investments, was 202% for non-life and 448% for life, well above the regulatory minimum of 120%. Fitch expects the RBC for both life and non-life to be maintained above 200% in the medium to long term.

SLIC has an asset base of over LKR150bn. The company is the market leader in non-life insurance in Sri Lanka, accounting for 22% of GWP in the market. In the life segment, the company is the second-largest, accounting for 18% of market GWP in 2014.

RATING SENSITIVITIES

An upgrade is unlikely in the near term, as SLIC’s IFS rating is at the same level as Sri Lanka’s Long-Term Local-Currency IDR (BB-/Stable). Conversely, if Sri Lanka’s rating is downgraded, SLIC’s Insurance Financial Strength rating is likely to be downgraded.

SLIC’s National Ratings may be upgraded if it is able to maintain sizeable market share, maintain its combined ratio well below 95% (2014: 103.7%) and significantly reduce its non-core investments.

The National and International ratings may be downgraded if there is:

– Significant weakening in SLIC’s market position,

– Deterioration in the non-life combined ratio to above 100% on a sustained basis,

– Weakening in SLIC’s importance to the government, increased pressure from the state for higher dividend payouts or a significant increase in non-core investments.
(Colombo/September 30 2015)
 

Sri Lanka Central Bank stubbornly defends 5% inflation target

ECONOMYNEXT – Sri Lanka Central Bank stubbornly defended the 5% inflation target it recommended and signed with the government for the next three years citing that it was the only “optimal solution” and rubbished claims that the target is high and erodes the purchasing power of the general public.

Economists and monetary policy critics have strongly advocated that the Central Bank lower its official inflation target from 5% to 2%, emphasizing that a lower target is essential to break the country’s historical cycle of currency instability.

Proponents of the 2% target argue that a 5% baseline implicitly embeds a continuous, compounding erosion of domestic purchasing power, increasing price levels by over 15% across a three-year window.

In a country recovering from hyperinflation, critics contend that a targeted 5% annual inflation creates an environment where nominal prices and living costs permanently outpace real wage growth, continually straining lower- and middle-income households.

However, the Central Bank recommended to the government and signed a three-year agreement to maintain the 5% inflation target for the three years through October 2029.

Central Bank Governor Nandalal Weerasinghe explained at a panel discussion with his junior officers that countries choose inflation targets depending on their growth potential and ability to grow.

“So, this is where one can argue, why 2% inflation, is it better? Looking at the purchase power, it looks better, but it’s not better,” he told the gathering in response to a question.

“It is worse, because it will create a country that can grow, much lower below its potential…. It’s not welfare optimization. It will make a lot of people worse off than it will make a lot of people better off.”

A primary structural argument for adopting a 2% inflation target centers on external stability and protecting the Sri Lankan rupee.

When Sri Lanka maintains a 5% inflation target while its key international trading partners such as the United States, Eurozone, and major Asian economies  aim for 2%, a structural inflation differential of around 3% is built directly into the economy.

According to economic theory and historical precedent, this persistent inflation gap exerts steady downward pressure on the domestic currency, forcing nominal exchange rate depreciation.

Advocates argue that lowering the target to 2% would align Sri Lanka with global standards, anchor long-term exchange rate expectations, and prevent recurring balance-of-payments vulnerabilities.

Only 5%

However, Weerasinghe said the 5% target has the “right balance” and the Central Bank had conducted extensive research before arriving at the decision.

“I think, we don’t see any other counterfactual to say, it’s not 5%, it’s 4%, or 2%, or 3%, or 6%, or 7%,” he said.

“A lower inflation target can make the solution worse than what we think…. It won’t be better because everyone can be benefited out of higher growth.”

“If you are coming to a solution, where inflation can drag down the growth below potential, that won’t be the optimal solution.”

“We are all convinced and that’s why we have made the recommendation, government also agreed.”

He said the central bank will reassess and come up with the right level that could be lower in the future and that decision will be data-driven and evidence-based.

Analysts have stressed that a 2% inflation target is critical for lowering long-term interest rates and encouraging capital investment.

Under a 5% target, which carries an allowed accountability band of 2 percentage points, permitting inflation to fluctuate between 3% and 7%, lenders and foreign bondholders demand a higher inflation risk premium to compensate for potential price volatility.

This inflates domestic borrowing costs for both private enterprises and the government. By committing to a tighter 2% anchor, the central bank would provide greater policy credibility, reduce nominal interest rates across the yield curve, and foster a far more predictable environment for long-term private sector investment and debt sustainability.

The data showed, the Central Bank missed the inflation targets for most quarters in the three-year period through end September 2026.

The Bank has blamed lower energy prices for disinflation and missing the target below the lower band of 3% and higher energy prices for breaching the target above upper limit of 7%. (Colombo/October 09/2026)

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Sri Lanka rupee closes at 330.85/95 to US dollar spot, bond yields edge up

ECONOMYNEXT – Sri Lanka’s rupee closed at 330.85/95 to the US dollar in the spot market on Friday, from 330.95/331.00 the previous day, while bond yields closed slightly higher, dealers said.

A bond maturing on 01.08.2030 closed at 11.30/35 percent, up from 11.25/35 percent.

A bond maturing on 15.10.2030 closed at 11.37/40 percent, up from 11.30/40 percent.

A bond maturing on 01.02.2031 closed at 11.42/47 percent, up from 11.35/45 percent.

A bond maturing on 15.12.2032 closed at 11.75/85 percent, up from 11.75/80 percent.

A bond maturing on 15.10.2034 closed at 12.10/15 percent, from 12.05/15 percent. (Colombo/Oct9/2026)

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Sri Lanka stocks close up, ASPI gains 0.41-pct

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed higher on Friday, CSE data showed, with the benchmark All Share Price Index moving up 0.41 percent.

The ASPI was up 82.57 points at 20,316.91, while the more liquid S&P SL20 was up 0.45 percent, or 26.19 points, at 5,788.75.

The ASPI ended the week down 496 points from last Friday, amidst a mixed week of trading.

Positive contributors to the ASPI were Dialog Axiata (up 0.91 percent at 44.50 rupees), Hatton National Bank (up 0.93 percent at 379.00 rupees), Commercial Bank of Ceylon (up 0.38 percent at 200.00 rupees), Richard Pieris and Company (up 4.30 percent at 26.70 rupees), and Laugfs Gas (up 7.35 percent at 40.90 rupees).

SMB Finance (down 9.09 percent at 1.00 rupee), LOLC Holdings (down 1.25 percent at 415.25 rupees), Haycarb (down 1.37 percent at 198.50 rupees), and Industrial Asphalts (Ceylon) (down 16.67 percent at 0.50 rupees) were top negative contributors.

Market turnover was 1.05 billion rupees. Diversified financials led turnover with 233.69 million rupees, followed by capital goods with 200.09 million rupees.

During the session, crossings in Lanka Milk Foods (LMF) in the first half of the trading day drew market interest, Raynal Wickremeratne, Head of Research and Strategy at NDB Securities, said.

“Usually 20,000 is also a psychological limit,” Wickremeratne said. “When it comes back closer to that, people also might feel like it’s worth buying, so that’s why sometimes coming close to that you might have a bit of a move.” (Colombo/Oct09/2026)

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Sri Lanka Customs’ September revenue exceeds target by 32-pct

ECONOMYNEXT – Sri Lanka Customs exceeded its September target by 32.1 percent, while the revenue in the first nine months of 2026 jumped around 22 percent compared to the same period last year, official data showed.

Customs’ September revenue target was set at 195.6 billion rupees. However, the revenue-collecting body collected 258.3 billion rupees that month, exceeding the target by nearly a third, according to official data.

It also exceeded the cumulative target for the first nine months by 29.2%, achieving 2,117 billion rupees.

Last year, Customs collected a record 2,551 billion rupees in revenue, exceeding a revised target of 2,241 billion rupees for the year and achieving 64.2% higher revenue than the previous year’s revenue of 1,553 million rupees.

Customs has set a revenue target of 2,207 billion rupees for this year, 13.5% less than last year as it expects a significant decline in car imports. Data showed it achieved 95.9% of this year’s target in the first nine months.

Analysts expect the revenue collecting body to achieve its 2026 full year target by mid-October,

Sri Lanka Customs’ revenue jump is largely due to stronger enforcement, improved valuation practices, and a rebound in import volumes after years of contraction.

Following the 2022 economic crisis, imports fell sharply as the country imposed restrictions to conserve foreign exchange.

However, with the stabilization of reserves, the relaxation of certain import controls, and a steady recovery in consumer demand, customs collections from import duties, excise, and other levies have risen.

Officials note that tighter monitoring of under-invoicing and misdeclaration of goods has also contributed to boosting state revenue.

The combined effect of increased import activity, currency movements, and stricter enforcement has positioned Customs as one of the top revenue sources for the Treasury in 2025, providing a vital cushion as the state works to meet fiscal targets under the IMF-supported program. (Colombo/October 09/2026)

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IESL, Dialog open Sri Lanka entrepreneurs challenge

ECONOMYNEXT – The Institution of Engineers, Sri Lanka (IESL) and Dialog Axiata have launched the IESL National Startup Challenge, for aspiring entrepreneurs to transform innovative ideas into commercially viable, investment-ready startups.

The competition invites Engineering undergraduates, practitioners and participants in an Open Category for Non-Engineers to submit ideas across 12 innovation verticals.

“The IESL National Startup Challenge is designed to turn innovative ideas into viable businesses by connecting aspiring entrepreneurs with industry expertise, mentorship and continuous practical support,” Eng Jasmine Nanayakkara, Chairperson of the Entrepreneurship Forum at the Institution of Engineers, Sri Lanka, said.

“By encouraging our engineers and aspiring founders to create, commercialise and scale solutions, we aim to contribute to new ventures, new opportunities and meaningful job creation for Sri Lanka’s skilled and educated next generation.”

Participants will progress through idea development, pitching, incubation, prototyping, validation, minimum viable product development and business scaling, supported by industry experts, mentors and ecosystem partners.

The programme will culminate in a Top 10 selection, with the first-place winner receiving an award of 1 million rupees.

Each of the Top 10 teams will receive a Dialog Digital Startup Support Package valued at 250,000 rupees, comprising selected Dialog digital products and services.

Dialog is providing technical expertise, mentors and digital resources to help participating teams develop, validate and scale their solutions.

“Dialog is extending its digital capabilities, mentorship and ecosystem support to help promising teams progress from concept to validation and investment readiness,” Dialog Axiata said.

The National Startup Challenge also brings together a network of partners, including The Ceylon Chamber of Commerce as Ecosystem and Mentoring Partner, Helago as Official Mobility Partner, Helakuru as Official Digital News Partner, and Real Life as Official Climate Action Partner.

Applications are now open via www.iesl.lk/announcements, giving aspiring entrepreneurs an opportunity to access the resources and funding they need to succeed. Applications close on 16th November 2026. For more information, contact mgr.pub@iesl.lk / 071 109 4393. (Colombo/Oct9/2026)

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Sri Lanka stocks trend higher, ASPI up 0.86-pct

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange opened higher on Friday, CSE data showed, with the benchmark All Share Price Index moving up 0.86 percent.

The ASPI was up 174.62 points at 20,408.96, while the more liquid S&P SL20 was up 0.86 percent, or 49.77 points, at 5,812.33.

Positive contributors to the ASPI were Commercial Bank (up 0.88 percent at 201.00 rupees), Dialog Axiata (up 1.59 percent at 44.80 rupees), Distilleries Company of Sri Lanka (up 1.76 percent at 52.00 rupees), and Hatton National Bank (up 1.20 percent at 380.00 rupees).

SMB Finance (down 9.09 percent at 1.00 rupee), Haycarb (down 0.75 percent at 199.75 rupees), Malwatte Valley Plantations (down 1.79 percent at 55.00 rupees), and Odel (down 4.04 percent at 9.50 rupees) were top negative contributors.

Market turnover was 343.62 million rupees. Capital goods led turnover with 77.51 million rupees.

E.B. Creasy & Company PLC announced that it has executed a corporate guarantee of 50 million rupees with effect from September 30, 2026, on behalf of its subsidiary, E. B. Creasy Logistics Ltd, guaranteeing banking facilities obtained by the company. The company stated that the delay in making the disclosure was due to a delay in receiving official notification from the bank on the execution of the guarantee. (Colombo/Oct09/2026)

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