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Tuesday October 6th, 2026

Sri Lanka’s Hatton National Bank expects 12-14-pct credit growth in 2020

CREDIT HOPES: Sri Lanka’s private credit growth is forecasted to pick up to 14 percent by First Capital, an investment house based in Colombo.

ECONOMYEXT – Sri Lanka’s Hatton National Bank is expecting 12-14 percent loan growth in 2020 as the banking system recovers from a credit slowdown and economic growth is expected to accelerate, Chief Operating Officer Dilshan Rodrigo said.

In the 9-months to September 2019 HNB’s loans and advances contracted 4 percent to 749 billion rupees as Sri Lanka recovered from a currency collapse in 2018.

Hatton National Bank is Sri Lanka’s second largest private bank by assets. Group assets totaled 1,161 billion by September.

Interest rates have also fallen in 2019, as private credit slowed.

HNB’s profits are also expected to improve on the back of a corporate income tax from 28 percent to 24 percent, lifting of a so-called debt repayment levy.

A determination by Sri Lanka’s revenue office that government dollar securities styled Sri Lanka Development Bond would again be tax free would also help the bank from 2019 onwards.

Group profits were down 34 percent to 8.4 billion rupees in the nine months to September 2019.

Sri Lanka’s banks are now trading at earnings multiples that are at 10-year lows, equity researchers at First Capital, a Colombo-based investment house said.

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First Capital is forecasting private credit to grow 14 percent in 2020. In 2019, private credit slowed to 4.5 percent according to central bank data.

Rodrigo said a government debt moratorium for distressed customers and also performing customer who asked for it which was devised in consultation with the industry was ‘sensible’.

The moratorium may involve about 5 to 10 percent of the loan book, including a moratorium already given to tourism sector customers after Easter Sunday attacks, Rodrigo said.

Bad loans in Sri Lanka’s banking sector have edged towards 5 percent and 9 percent in non-banks after the most recent currency collapse.

However higher levels of bad loans have been seen in the wake of earlier currency crises.

Sri Lanka has suffered almost continuous monetary instability from 2015 through two currency crises, triggering output shocks and a spike in bad loans toward 5 percent.

Sri Lanka cut rates and injected liquidity from April 2018, amid a pick-up in private credit, triggering monetary instability and capital flight, though the budget deficit was under control. Rates were later raised to correct instability, triggering an output shock.

In 2020, Sri Lanka’s budget deficit is expected to expand to 7.5 percent after tax cuts, amid a private sector credit pick up.

In January the central bank cut rates, despite the expected spike in the deficit, though data showed that both deposit rates and gilts yields had turned around and inflation also was moving up.

Sri Lanka’s economic growth is expected to pick-up to 3.7-4.0 percent in 2020 from 2.6 percent levels in 2019. (Colombo/Feb19/2020 – Update II)

Two in five Sri Lankans poor or vulnerable despite economic recovery: World Bank

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)

 

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

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)

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Sri Lanka stocks recover to close flat

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)

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Only 8-pct of Cyclone Ditwah rebuilding funds spent as Sri Lanka logs rare surplus: WB

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)

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Sri Lanka, Thailand to renew 30-day tourist visa exemption

ECONOMYNEXT – Sri Lanka and Thailand have agreed to enter into a mutual visa exemption agreement for ordinary passport holders, minister Nalinda Jayatissa said.

Cabinet has approved a proposal to sign the agreement between Sri Lanka and Thailand.

“Both parties have agreed to enter into an agreement on visa exemption for holders of ordinary passports, with the aim of further strengthening the friendly relations between Sri Lanka and Thailand and facilitating travel for their citizens,” Jayatissa said.

The waiver applies strictly to tourism and excludes categories that require prior official clearance, such as employment, studies, and media work.

“Under this agreement, citizens of both countries holding valid ordinary passports will be permitted to enter, exit, and transit without a prior visa for general tourism purposes — excluding employment, education, media activities, or other activities requiring prior approval.”

Under the terms, visitors can stay for a maximum single duration of 30 days and an aggregate stay of up to 90 days within a 180-day window.

Responding to questions on whether ordinary passport holders will be able to enter Thailand under the same terms, Jayatissa confirmed the reciprocal nature of the plan:

“To make travel convenient for ordinary citizens — for ordinary citizens of both countries, Thailand and Sri Lanka — approval is being obtained to issue these free visas for a 180-day period,” Jayatissa said.

He added that both countries have reached an agreement allowing travelers to enter, exit, and transit without requiring a prior visa permit for general tourism.

In 2024, Thailand exempted visa for Sri Lanka passport holders for up to 60 days for the purposes of tourism, business engagements, urgent work or ad-hoc-work.

Thailand later limited the stay period to 30 days, and last month removed Sri Lanka from Thailand’s 60-day visa exemption scheme effective September 15.

Sri Lanka provides Thais a 30 day visa free single entry, after they obtain an Electronic Travel Authorization (ETA) online.

Visa exemption could increase tourism and investor interest however, this could potentially attract criminals and illegal businesses into a country unless proper protocols are put in place. (Colombo/Oct6/2026)

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Five companies win Rs4bn Sri Lanka road improvement bids

ECONOMYNEXT – Sri Lanka has awarded contracts valued at over 4 billion rupees for several road infrastructure improvement projects, minister Nalinda Jayatissa said.

Bids were called from contractors, and following evaluation of the bids, the Cabinet approved the proposals to award contracts as follows:

– Asset Engineering (Pvt) Ltd was awarded a 744.68 million rupee contract to improve the Blackpool-Ambewela-Pattipola-Horton Plains Road (12+500km to 18+000km) (B512).

– Nagma Engineering (Pvt) Ltd was awarded a 645.69 million rupee contract to improve the GomburuOya-Balapokuna Road (0+000km to km 8+500 (excluding sections from 5+250km to 5+450km and 6+900 to BD 7+150).

– K D A Weerasinghe & Co (Pvt) Ltd was awarded a 711.93 million rupee contract to improve the Lady McCallum Drive (0+000km to 2+700km) (B249).

– Senerath Engineering (Pvt) Ltd was awarded a 1,291.80 million rupee contract to improve the Palapathwala-Galewela Road (19+000km to 27+000km) (B346).

– Komuthi Engineering Services (Pvt) Ltd was awarded a 666.62 million rupee contract to improve the Kadawatha-Ragama-Welisara Road (3+000km to 8+050km) (3168). (Colombo/Oct6/2026)

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