Economy

Sri Lanka to cut foreign debt, ride Modern Monetary Theory: CB Governor

Tuesday December 1, 2020 2:32 pm

ECONOMYNEXT – Sri Lanka will cut the share of foreign debt to 40 percent by 2021, raise more domestic debt and repay foreign debt, riding on Modern Monetary Theory to solve debt problems, Central Bank Governor W D Lakshman said.

“Our strategy is going to pay off foreign debt,” Governor Lakshman told an annual economic forum organized by Sri Lanka’s Ceylon Chamber of Commerce.

“This and the stated policy of not pursuing debt creating investments will help manage the fiscal situation.”

The domestic to foreign share of debt will 60 to 40 in 2021 from 55 to 45 in 2020.

In 2019, the domestic share was 51 percent and foreign 49 percent, State Minister for Finance Nivard Cabraal had said earlier.

Sri Lanka’s ratio of non-concessional debt is 23 percent, he said. The remainder is domestic debt or long term concessional debt.

“The fears around debt sustainability appear to be unfounded,” he said.

As rupee-denominated bonds were within the ‘sovereign powers’ money could be printed to repay them as indicated by ideas like Modern Monetary Theory, he said.

“One of the factors we are depending heavily on in terms of government debt is to increase the proportion of domestic debt,” Governor Lakshman said.

“The domestic currency debt – if I may also use the term – in a country with sovereign powers of money printing as the modern monetary theorists would argue – is not a huge problem.

“The debt can be rolled over. That is when it is mostly the domestic debt.”

However concerns have been raised that the debt is not being rolled over but paper debt is being turned in to reserve money through failed bill auctions.

Countries like Japan, Singapore, US also had large domestic debt shares exceeding the gross domestic product, he said.

Countries with strong exchange rates tended to have low-interest rates.

Singapore, which borrows to give returns to it Central Provident Fund, and also build a risk free yield curve, invests the proceeds through Government Investment Corporation, with the Monetary Authority of Singapore converting the funds to foreign exchange.

The MAS law prohibits money printing, and has a floating policy rate.

Sri Lanka is following a form of austerity on its own terms through import compression, he said.

“This year we have reduced imports by four billion dollars which is equal to total debt repayment,” he said.

Sri Lanka’s imports are driven by merchandise exports, services exports, tourism as well as government foreign borrowing and foreign direct investment.

A trade or current account deficit is driven by a savings-investment gap, which is financed from abroad. (Colombo/Dec01/2020 – Update III)

Economy

Sri Lanka Customs surpasses revenue goal for ninth straight month in Sept

Containers are shown at Ningbo-Zhoushan port on August 15, 2021. Suo Xianglu/VCG/Getty Images/CNN

Thursday October 1, 2026 7:17 pm

ECONOMYNEXT – Sri Lanka Customs exceeded its monthly target for the ninth consecutive month in September, achieving the target before the month ended, official data showed.

Customs’ September revenue target was set at 195.6 billion rupees.

However, in the first 29 days of the month, the revenue-collecting body had already collected 245.9 billion rupees, exceeding the target, official data showed.

Customs has set a revenue target of 2,207 billion rupees for this year, 13.5 percent less than last year as it originally expected a significant decline in car imports.

Data showed it has already achieved 95.4 percent of this year’s target or 2,104.6 billion rupees even before the end of nine months.

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

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 01/2026)

Economy

Sri Lanka’s 2026 economic growth likely to hit three-year low

Thursday October 1, 2026 6:54 pm

ECONOMYNEXT – Sri Lanka’s economic growth is likely to slow down this year compared to the last two years amid Middle Eastern escalation dragging down the island nation’s economic activities with high fuel prices.

Sri Lanka, recovering from an unprecedented economic crisis in 2022, expanded by 5 percent in both 2023 and 2024 after a contraction in the previous year.

However, it is expected to slow down this year weighed down by the impact of the Middle Eastern crisis.

Already, the country witnessed 4.2 percent economic growth in the second quarter of this year, its lowest in eight quarters.

Central Bank Governor Nandalal Weerasinghe said the growth will be above 4 percent this year, including the second half of this year.

“I think it is too early for us to give a number. But what we say is, second-half growth looks like it will remain above 4% for the next two quarters, based on the activity indicators. the actual activities taking place,” the Governor told reporters in a media briefing.

“We see growth will be above 4% in the two halves, but an annual projection we have not done yet; we will see later.”

In January while launching the Central Bank’s policy agenda for this year, Weerasinghe saidSri Lanka’s economic growth will be around 4-5 percent.

In June, Deputy Finance Minister Anil Jayantha Fernando said Sri Lanka still hopes to achieve 5 percent economic growth this year despite monetary policy tightening and falling consumption amid rising prices.

“The government projection is up to the government. I don’t think we should not comment on that,” the Governor said.

“The IMF has 3.5%. The government has something, the World Bank has given a projection, the ADB has another projection, so that is based on their own assumptions. We can comment on our projections only.” (Colombo/October 01/2026)

Economy

Sri Lanka current account surplus $133mn in Aug 2026 on lower import spend

Thursday October 1, 2026 4:01 pm

ECONOMYNEXT – Sri Lanka recorded a 133 million US dollar surplus in its current account in August 2026, official data showed, following four months of deficits.

“The surplus was supported by the lower trade deficit compared to recent months, reflecting lower import expenditure,” the central bank said.

The current account recorded a deficit of 291 million dollars during January-August 2026, due to pressures on the external sector from the escalation of the conflict in West Asia.

The current account is a mirror image of the financial account (subject to errors and omissions).

The merchandise trade deficit widened in August 2026, year-on-year, due to higher import expenditure and lower export earnings.

The total trade deficit during January–August 2026 widened to 7.2 billion dollars, from 4.3 billion the previous year.

Total fuel import costs were around 4 billion dollars during January–August 2026, a 61.6 percent year-on-year increase.

Fuel import costs dropped for the fourth consecutive month in August 2026.

Motor vehicle import costs was 189 million dollars in August, a 24.2 percent drop from the same period last year.

Total motor vehicle imports during January–August 2026 was 1,684 million dollars.

“The terms of trade deteriorated on a year-on-year basis in August 2026, as import prices increased at a faster pace than export prices. Similarly, the terms of trade deteriorated during January–August 2026 compared to the corresponding period of 2025.”

The services account recorded a surplus of 220 million dollars in August, a 24.4 percent reduction from last August.

The total services account surplus during January-August 2026 fell 21.4 percent to 2.1 billion dollars, on a year-on-year basis.

Tourist arrivals fell 3.3 percent in the month compared to last August.

Total arrivals during January-August 2026 fell 2 percent, compared to the corresponding period of 2025.

Tourism earnings were estimated at 264 million dollars in August, a 2.1 percent increase from a year earlier.

But total tourism earnings during January-August 2026 fell 10 percent to 2.1 billion dollars, compared to 2025.

Workers’ remittances increased by 10 percent to 749 million in August and by 19.8 percent to 6.1 billion dollars during January-August.

Foreign investment in the government securities market saw a net inflow of 70.2 million dollars in the month.

Foreign investment in the Colombo Stock Exchange saw a net outflow of 58.1 million dollars.

Gross official reserves increased to 6.9 billion dollars by end August.

By end At the end of September, the rupee had depreciated by 6.3 percent against the US dollar on a year-to-date basis. (Colombo/Oct1/2026)

Markets

Sri Lanka stocks close up, banks lead turnover

Thursday October 1, 2026 3:28 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed higher on Thursday, CSE data showed, with the benchmark All Share Price Index moving up 0.33 percent.

The ASPI was up 67.97 points at 20,880.90, while the more liquid S&P SL20 was up 0.14 percent, or 8.30 points, at 5,902.46.

Positive contributors to the ASPI were Dialog Axiata (up 1.33 percent at 45.80 rupees), Singer (Sri Lanka) (up 2.88 percent at 78.60 rupees), Carson Cumberbatch (up 1.32 percent at 729.50 rupees), LOLC Holdings (up 1.72 percent at 443.00 rupees), and Commercial Bank of Ceylon (up 0.25 percent at 203.00 rupees).

LOLC Finance (down 3.77 percent at 5.10 rupees), Sri Lanka Telecom (down 1.29 percent at 83.90 rupees), and People’s Leasing & Finance (down 2.78 percent at 17.50 rupees) were top negative contributors.

Market turnover was 1.43 billion rupees. The banking sector led turnover with 489.34 million rupees, followed by capital goods with 421.33 million rupees.

Crossings in Sampath Bank recorded a turnover of around 230 million rupees, with crossings also seen in Access Engineering, Lanka IOC, Hatton National Bank, and John Keells Holdings.

“Apart from that, there wasn’t anything significant to talk about. It was a fairly normal trading day,” Raynal Wickremeratne, Head of Research and Strategy at NDB Securities, said.

“I think we saw about 1.4 billion in turnover, which definitely showed a bit of an improvement, and today the market was also up by about 65 to 70 points. There is a slight renewal in sentiment, but I don’t think this is properly indicative of a long-term trend as such. This is more a cycle—every time there is a bit of a decline, you see people coming back to some good companies,” Wickremeratne said. (Colombo/Oct01/2026)

Health

Sri Lanka to fix prices for 90-pct of imported medicines within a year: NMRA

Thursday October 1, 2026 12:24 pm

ECONOMYNEXT — Sri Lanka’s National Medicines Regulatory Authority (NMRA) expects to enforce maximum retail prices (MRPs) for roughly 90 percent of imported medicines over the coming year, NMRA chairman Ananda Wijewickrama said.

The regulator is carrying out brand-specific price determinations across more than 6,000 registered formulations as pharmaceutical companies submit applications for their annual import permits.

“These 6,000 medicines exist under various brand names. For example, if we take the medicine called Metformin, I think it is registered under more than 30 brand names. We determine prices for all 30 of these separately,” Wijewickrama said.

The price-setting mechanism would encompass the majority of active imports within a 12-month period, he said.

While certain registered medicines imported only for sporadic state tenders may fall outside this cycle, active commercial imports will be capped.

Pricing determinations will remain an ongoing process to adjust for raw material costs and exchange rate shifts.

To prevent inflated transfer pricing, import costs (Cost, Insurance, and Freight – CIF) are benchmarked directly against domestic retail rates in the manufacturing nations, such as India or Bangladesh.

All approved maximum retail prices will be published on the NMRA website for consumer reference, NMRA officials told reporters.

Standardizing MRPs will eliminate regional disparities where retail pharmacies in areas like Jaffna, Anuradhapura, and Colombo sell identical products at differing prices, Wijewickrama claimed.

While setting MRPs or price caps on medicines is intended to protect patients from price gouging, and lower healthcare costs, critics point out that international pharmaceutical companies would opt to withdraw products from a country, especially a small market like Sri Lanka, rather than sell at a loss.

This would take away a patient’s access to possibly higher-quality meds and leave them with generic meds. (Colombo/Oct01/2026)

Construction and Real Estate

Sri Lanka construction activity PMI eases in August amid bitumen shortage

Thursday October 1, 2026 11:55 am

ECONOMYNEXT – Sri Lanka’s construction sector activity expanded at a slower rate in August 2026 due to an ongoing bitumen shortage, with a Purchasing Managers Index compiled by the central bank registering a value of 59.4 compared to 61.4 in July.

“Many survey respondents highlighted the ongoing bitumen shortage, which continued to constrain road construction progress, limiting the overall growth momentum of the construction industry,” the central bank said.

The New Orders Index expanded, registering 62.5 in August from 57.1 in July, “mainly driven by the government-funded projects” the central bank said.

The Quantity of Purchases Index rose at a slower rate, registering 59.4 from 64.7 in July.

The Employment Index registered 59.7, from July’s 61.8, “although many firms continued to report skilled labour shortages.”

“Many survey respondents continued to highlight persistent shortages of skilled labour and raw materials as key constraints to sectoral growth.”

The Suppliers’ Delivery Time remained high in August, reflecting prevailing workloads among suppliers, registering an index value of 59.4 from 60.0 in July.

Bitumen shortages and fluctuations in material prices continued to pose challenges, CBSL said. (Colombo/Oct1/2026)