ECONOMYNEXT – Sri Lanka’s 2026 capital spending is under review and hopefully, it will be fully utilized, Cabinet Spokesman and Media Minister Nalinda Jayatissa said, amid fears of under spending the total allocation of Rs.1,380 billion for this year. 

Sri Lanka had spent only 17.4 percent of the allocated total capital expenditure as of mid-June and Minister Jayatissa did not provide the latest amount spent on public investment.   

“We monitor this quarterly. Only in the final months of the year do invoices start arriving, payments finalize, and projects conclude,” he said when asked about the total expenditure on capital investment so far this year.  

“Usually, 70 percent of the completion is towards end of November. We are at the moment reviewing. We are unable to reveal the total figure at the moment.” 

Sri Lanka’s chronic failure to utilize its full budgetary allocations for capital investment reflects deep-rooted structural inefficiencies in public financial management and project execution, analysts and economists say. 

They warn of lower economic growth in the future if the government fails to implement its planned capital investment projects. 

Year after year, bureaucratic delays, protracted procurement disputes, politicized project selection, and a lack of technical expertise within line ministries leave a significant portion of capital expenditure unspent on the Treasury books.

This capital under utilization carries severe long-term repercussions for the island’s economic trajectory.

By failing to deploy allocated funds into critical infrastructure such as transport networks, modernized power grids, and digital public systems, the state stifles productivity growth, worsens structural bottlenecks, and lowers the country’s overall gross domestic product (GDP) potential.

In a fragile post-default macroeconomic climate, this persistent shortfall also sends a negative signal to international development partners and private investors.

It demonstrates an institutional inability to absorb capital effectively, thereby stalling the very structural transformation required to safely out-grow a historic debt burden.

President Anura Kumara Dissanayake’s government has promised to change the process to fast-track the spending, but the move is yet to materialise, analysts say. (Colombo/June 15/2026)

ECONOMYNEXT — Although Sri Lanka’s economy has returned to its 2018 size and regained its upper-middle-income status, two in five people remain poor or vulnerable to falling into poverty, the World Bank said in its latest Development Update.

Under a poverty line of 4.20 US dollars a day, poverty is estimated at 16.9 percent in 2025. While down from a peak of 20.7 percent in 2023, it remains well above the 11.5 percent recorded in 2019. In 2026, two-fifths of Sri Lankans are either poor or living within 50 percent of the poverty line, meaning a single shock could push them under.

The estimates use an updated methodology based on annual Labour Force Survey data, which lowered the previously estimated crisis peak of 27.6 percent, though the broader trend remains unchanged.

Weak jobs and stagnant earnings explain much of the continued hardship. Real wages remain about 12 percent below 2019 levels, while labour force participation stood at 49.4 percent in 2025, down from 52.3 percent in 2019. Female participation, at 32.4 percent, is among the lowest in the region. Recent price hikes, including a 21 percent rise in transport costs, also halted the recovery in real incomes in the first half of 2026.

“The increase in living costs comes before many households have rebuilt the financial buffers depleted during the crisis,” the report said.

The burden is also unevenly distributed across the country. Poverty levels are two to three times higher outside the Western Province, climbing to 36 percent in the estate sector.

The lender also warned of long-term scarring among young children. Data on children under five show the share of underweight children rose from roughly 12 percent in 2021 to about 16 percent in 2025, while child stunting increased from around 7.5 percent to about 10 percent during the same period.

While the World Bank projects poverty will decline to 14 percent by 2028, it will still remain above pre-crisis levels.

“The recovery remains narrow unless growth generates a larger number of productive jobs that are more broadly shared,” the World Bank cautioned. (Colombo/Oct6/2026)

ECONOMYNEXT – Sri Lanka’s rupee closed at 330.85/95 to the US dollar in the spot market on Tuesday, weaker from 330.60/70 the previous day, while bond yields closed higher, dealers said.

A bond maturing on 01.08.2030 closed at 11.20/25 percent, up from 11.12/20 percent.

A bond maturing on 15.10.2030 closed at 11.27/33 percent, up from 11.20/25 percent.

A bond maturing on 01.02.2031 closed at 11.30/35 percent, up from 11.25/30 percent.

A bond maturing on 15.12.2032 closed at 11.70/75 percent, up from 11.67/75 percent.

A bond maturing on 15.10.2034 closed at 12.00/10 percent, up from 11.95/12.05 percent.

An auction of 80,000 million treasury bills is scheduled for October 7. (Colombo/Oct6/2026)

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed flat on Tuesday, CSE data showed, with the benchmark All Share Price Index moving up a marginal 0.03 percent.

The ASPI was up 5.97 points at 20,650.23, while the more liquid S&P SL20 was down 0.05 percent, or 2.74 points, at 5,844.28.

“Market was slightly up,” Raynal Wickremeratne, Head of Research and Strategy at NDB Securities, said. “We saw about a billion in turnover which again is not fantastic, but it’s better than some of the days that we’ve had before.”

He noted that crossings took place in Citizens Development Business Finance (CDB), Commercial Bank, Ceylon Cold Stores (CCS), and plantation stocks.

Positive contributors to the ASPI were Ambeon Holdings (up 8.05 percent at 34.90 rupees), Ceylinco Holdings (up 1.60 percent at 2,898.50 rupees), LOLC Finance (up 2.00 percent at 5.10 rupees), and PGP Glass Ceylon (up 1.45 percent at 56.10 rupees).

Hatton National Bank (down 0.39 percent at 380.50 rupees), Asiri Surgical Hospital (down 21.88 percent at 10.00 rupees), Haycarb (down 1.69 percent at 203.50 rupees), and Overseas Realty (Ceylon) (down 0.97 percent at 51.00 rupees) were top negative contributors.

Market turnover was 1.06 billion rupees. The Food, Beverage & Tobacco industry group led turnover with 243.40 million rupees.

Renuka Agri Foods announced that 6,117,161 Ordinary Voting Shares of the company have been listed with effect from October 6, 2026, pursuant to a scrip dividend in the proportion of 1: 130.58824265. (Colombo/Oct6/2026)

ECONOMYNEXT — Sri Lanka ran a rare budget surplus in the first half of 2026 as strong tax collections coincided with sharp delays in state spending, including emergency rebuilding funds, the World Bank said in its latest Sri Lanka Development Update October 2026, titled “From Recovery to Transformation”.

By mid-year, the government had disbursed only about 8 percent of the 500 billion rupees allocated for reconstruction after Cyclone Ditwah.

Execution was slow across the board, with only 16.7 percent of the full-year capital budget spent, while less than half of a 100 billion rupee relief package linked to the Middle East war had been paid out.

“This under-execution reflects weaknesses in public investment management, including project selection, procurement, and implementation capacity — rather than financing constraints,” the report said.

In contrast, state revenues showed strong growth. Total revenue rose 27.2 percent year-on-year, with tax collections climbing 25.9 percent, mainly driven by Value Added Tax (VAT) and duties on vehicle imports following the lifting of import curbs.

With overall spending expanding just 7.9 percent, the government recorded a primary surplus of 1,233.1 billion rupees and an overall budget surplus of 9.5 billion rupees, compared with a 406 billion rupee deficit during the same period last year.

Revenues were further supported by new tax laws certified in June, which raised capital gains taxes, introduced VAT on foreign digital service providers, and increased VAT on financial services. The state is also piloting a national e-invoicing system.

Heavy interest costs continue to weigh on public finances, consuming around 46 percent of government revenue in 2025, though this has eased from nearly 80 percent at its peak between 2022 and 2023. The World Bank expects this share to fall to about 34 percent by 2028.

However, with government primary spending legally capped at 13 percent of gross domestic product (GDP), the World Bank warned that the administration must focus on spending efficiency.

“This spending ceiling increases the importance of improving spending quality rather than simply increasing spending levels,” it said. (Colombo/Oct6/2026)