ECONOMYNEXT – Sri Lanka’s Gross Domestic Product (GDP) grew by 4.2 percent in the second quarter of 2026 compared to a 5 percent growth in the same period last year, and slowing from a 5.1 percent expansion in the previous quarter, data Department of Census and Statistics showed.

The quarter faced challenges mainly from fuel rationing and high energy costs after the government raised fuel prices in the wake of Middle East escalation.

“The second quarter of 2026 started with an economic outlook that somewhat gloomy given the escalating tensions in the Middle-East,” the state-owned Statistics Department said in a statement.

“That uncertainty in economic expectations mainly shaped the economic activities in the second quarter with seemingly shortage of crude oil supply. Moreover, the adverse effects were more visible through subdued tourism performance.”

“In addition, agriculture activities reported a decline and some major economic activities reported relatively low expansions compared to the second quarter of 2025.”

GDP at constant (2015) prices reached 3,029.6 billion rupees in Q2 2026, up from 2,908.6 billion rupees in Q2 2025.

However, the growth marks a sustained recovery from the 10.6 percent contraction suffered during the economic crisis peak in Q1 2023.

Rs. 3,029,816 million from Rs. 2,908,570 million which was reported in the second quarter of 2025. The GDP growth rate for the second quarter of year 2026 has been reported as 4.2 percent positive growth.

Growth was led by the industrial sector, which expanded 7.3 percent, contributing 52.7 percent to total economic output.

The overall Agricultural activities declined by 2.3 percent in the second quarter of 2026 and service sector gained 2.7 percent.

The Statistics Department said accommodation and food serving, financial service activities and insurance activities reported comparatively diminished growth rates.  (Colombo/September 15/2026)

ECONOMYNEXT – Sri Lanka’s 2027 capital expenses will be around 2,000 trillion rupees and the government is in the process of speeding the procurement and approvals to fast track public investment projects, Cabinet Spokesman and Minister Nalinda Jayatissa said.

Sri Lanka has historically failed to spend its total capital expenditure allocations due to delay in procurement and approval process from the line ministries.

The island nation has spent only 17.4 percent of the allocated total capital expenditure of Rs.1,380 billion rupees as of mid-June this year, Finance Ministry officials have said.

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

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.

“For the upcoming year, we project capital expenditure or development expenditure of 2,000 billion rupees (2 trillion rupees). This is a substantial budget,” Cabinet Spokesman Jayatissa told reporters at the post-Cabinet media briefing on Tuesday.

He admitted the delay in utilizing the capital expenditure has been mainly due to delays in awarding contracts and starting project implementation in October.

“To effectively utilize these funds, awarding contracts in September or starting projects in October is insufficient; work must commence in January. We have established the necessary mechanisms, operational environment, and approvals to support this timeline,” he said.

He said normally by September, procurement activities are finalized and contracts are awarded in most places.

“Normally under this methodology, when work is carried out, this is the timeframe when work commences. Therefore, we can truly assess progress toward the end of December.”

“Progress does not happen in monthly increments of 10%, 15%, or 20%. Rather, by November or December, that percentage increases significantly. We expect it to increase further during this period.”

He said the government has faced a key issue regarding a shortage of tar in certain contracts, which persists currently.

“To address this, we submitted a cabinet paper two weeks ago to import 30,000 metric tons of tar. Although there is some delay in road development projects, we have the capability to complete them,” he said.

“Taking all these factors into account, we issued a circular to all ministries informing them that they do not need to wait until the budget is passed in Parliament. They can prepare their project plans, draft estimates, and initiate procurement activities. Only the final awarding of the procurement should be held back. This allows us to award contracts and commence physical work by January.”

This capital underutilization 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.

“This issue is not unique to our administration; it has been a persistent, long-standing systemic flaw,” Minister Jayatissa said.

“Recognizing this, four months ago we instructed ministries to initiate preliminary activities early. The Ministry of Finance will assume responsibility for facilitating the process so that you can advance procurement activities up to the award stage.” (Colombo/September 15/2026)

ECONOMYNEXT – Sri Lanka’s rupee closed at 330.70/331.00 to the US dollar in the spot market on Tuesday, weaker from 329.15/35 the previous day, while bond yields closed higher, dealers said.

A bond maturing on 15.09.2027 was quoted at 9.90/10.20 percent, up from 9.80/95 percent.

A bond maturing on 15.03.2028 was quoted at 10.35/45 percent.

A bond maturing on 15.12.2029 was quoted at 10.92/11.00 percent, up from 10.75/90 percent.

A bond maturing on 01.08.2030 was quoted at 11.35/40 percent, up from 11.10/15 percent.

A bond maturing on 15.10.2030 was quoted at 11.40/45 percent, up from 11.15/35 percent.

A bond maturing on 15.12.2032 was quoted at 11.80/85 percent, up from 11.60/65 percent.

A bond maturing on 01.06.2033 was quoted at 11.85/95 percent, up from 11.80/90 percent.

A bond maturing on 01.11.2033 was quoted at 11.90/12.00 percent, up from 11.75/85 percent.

A bond maturing on 15.10.2034 was quoted at 12.05/10 percent, up from 11.93/12.00 percent. (Colombo/Sep15/2026)

ECONOMYNEXT – The United Nations Development Programme (UNDP) in Sri Lanka has handed over 17 critical equipment to strengthen the DNA laboratory of the Government Analyst Department to increase the efficiency and effectiveness of the laboratory where evidence relating to SGBV and other crimes are concerned.

The equipment includes an RT PCR machine, PCR system and Crime Lite Serology Kit.

This initiative was a part of UNDP’s “Ensuring Justice for Victim Survivors of SGBV in Sri Lanka” project funded by the Government of Canada and jointly implemented by UNFPA Sri Lanka.

The equipment was procured after a comprehensive study of the existing processes of the DNA laboratory with the aim of supporting the accurate detection, analysis, and profiling of biological evidence, thereby strengthening the scientific basis of judicial proceedings.

“Together, these technologies form an integrated forensic workflow for SGBV investigations. Their combined use enhances the accuracy, reliability, and evidentiary strength of forensic DNA analysis, ultimately contributing towards the expedited clearance of the existing backlog of cases and accelerating the dispensation of justice,” UNDP said.

The equipment were handed over by Azusa Kubota, Resident Representative of UNDP in Sri Lanka to Kamani Perera, Government Analyst.

Minister Harshana Nanayakkara, High Commissioner of Canada Isabelle Martin, and representatives from partner organizations were present at the handover. (Colombo/Sep15/2026)

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed lower on Tuesday trading, CSE data showed, with the benchmark All Share Price Index moving down 0.24 percent.

The ASPI was down 51.79 points at 21,262.13, while the more liquid S&P SL20 was down 0.29 percent, or 17.66 points, at 5,976.67.

Positive contributors to the ASPI were Sampath Bank (up 0.36 percent at 140.25 rupees), Watawala Plantations (up 3.37 percent at 46.00 rupees), SMB Finance (up 10.00 percent at 1.10 rupees), and Lion Brewery (Ceylon) (up 1.25 percent at 1,780.00 rupees).

Dialog Axiata (down 2.95 percent at 46.00 rupees), Melstacorp (down 0.81 percent at 184.75 rupees), and Commercial Bank (down 0.49 percent at 204.00 rupees) were top negative contributors.

Market turnover was 2.23 billion rupees. Food, Beverage & Tobacco led turnover with 1.2 billion rupees.

A mandatory offer for Industrial Asphalts (Ceylon) fell through after the Securities and Exchange Commission refused to clear a share transfer because the company had been placed on the Colombo Stock Exchange Watchlist due to non-compliance. (Colombo/September15/2026)

ECONOMYNEXT — Sri Lanka’s Prime Melwa (Private) Limited will invest 112.2 million US dollars and 15.9 billion rupees to build a landmark mixed-use waterfront project within Colombo Port City, following Cabinet approval to designate it as a Primary Business of Strategic Importance.

The designation grants the development project exemptions and incentives under Section 53 of the Colombo Port City Economic Commission Act No. 11 of 2021, which requires Cabinet approval.

“The proposed development aims to construct a landmark mixed-use waterfront project in the Colombo Port City over the next few years, creating approximately 800 direct employment opportunities,” minister Nalinda Jayatissa said.

The venture brings combined capital commitment to over 112 million dollars in foreign direct investment alongside local rupee funding. (Colombo/September15/2026)