AGP Executive Report

Sri Lanka’s Fiscal & Debt Watch: Parliament approved a Rs. 20bn supplementary estimate without a vote, framed as a reallocation within the 2026 borrowing limit to fund relief linked to the Middle East conflict, while the finance ministry said central government debt was about US$ 98.96bn (end-March 2026) and total debt about US$ 102.2bn including provinces, local bodies and SOEs. Energy, Food & Growth Risks: The World Bank warned global growth could slow to 2.5% in 2026 as Middle East tensions lift energy prices and borrowing costs, with fertilizer and food prices also pressured. Minerals Push: A new National Mineral Policy took effect to curb corruption and improve transparency, with a focus on value-added processing inside Sri Lanka rather than exporting raw resources. Digital Payments: SLT-MOBITEL mCash integrated GovPay to let citizens pay thousands of government services (including traffic fines and taxes) via mobile and agent outlets. Trade & Investment Linkages: Sri Lanka pitched Port City Colombo as a South Asia gateway at a Dubai forum aimed at Gulf investment, while the ADB rolled out a $4bn crisis package for Middle East spillovers, with Sri Lanka among requesters. Sports Tourism Boost: FIFA agreed to support an international-standard stadium in Negombo, alongside the launch of the FIFA World Cup Fan Zone 2026 in Colombo. Market Pulse: Sri Lankan shares logged their biggest June gain, and the rupee weakened further against the USD in bank quotes.

Currency Watch: Sri Lanka’s rupee edged weaker against the US dollar, with several banks quoting higher dollar rates, including People’s Bank and NDB Bank, while Seylan Bank kept rates unchanged. Aid & Energy Shock: The ADB is mobilising a $4 billion package for Asia-Pacific countries hit by the Middle East conflict, with Sri Lanka among 15 applicants seeking support for fuel, food and trade finance. Airline Restructuring: Sri Lanka has named a high-powered committee to restructure SriLankan Airlines, chaired by Dr. Hans Wijayasuriya, with finance, legal and aviation experts on board. Trade Diplomacy: UAE–Sri Lanka CEPA talks are expected to move quickly, with officials saying the agreement could be signed soon to deepen investment and value-chain links. Digital Connectivity: SLT-MOBITEL Enterprise signed a Starlink reseller partnership to bring satellite connectivity to enterprises and SMEs, including remote areas. Food Security Pressure: A World Food Programme warning says the Iran war is worsening global food insecurity, with Sri Lanka among affected countries. Business & Innovation: SLASSCOM’s National Ingenuity Awards 2026 is set for 16 June, with 300+ applications across fintech, agritech, healthtech and more.

Food Security Shock: The World Food Programme warns Iran-war spillovers are pushing millions into severe hunger, citing 1.3m in Sri Lanka among those struggling as food and fuel costs rise and trade networks get disrupted. Judiciary Tension: Sri Lanka’s government says it has not yet secured Cabinet approval to raise Superior Court judges’ retirement age, but protests and legal-sector pushback are intensifying. FX & Export Rules: The Central Bank’s new export-earnings conversion timing aims to pull more dollars into the formal system, as markets watch rupee volatility and dollar demand. Public Finance Accountability: Auditor-General findings flag foreign loan balances over Rs. 518bn kept outside Sri Lanka’s statement of financial position, raising concerns over missing assets and reporting gaps. Anti-Corruption Drive: CIABOC reports arrests of 32 state officials in the first four months of 2026, alongside thousands of complaints processed. Banking Performance: CDB crosses the Rs. 200bn asset milestone with record profit and improved loan quality, signaling growth momentum. Green Finance Rollout: Sri Lanka operationalises its Green Finance Taxonomy with EU support, building tools for sustainable investment classification. Connectivity & Trade: SriLankan Airlines expands Saudi links via Saudia and Flynas, while Sri Lanka’s tea exports keep gaining traction in the UAE and Gulf. Labour & Workplace Safety: Sri Lanka engages the ILO on labour reforms, including steps to implement Convention 190 on violence and harassment at work.

Food Security Shock: The UN World Food Programme warns the Iran war is quietly pushing millions into severe hunger, with spillovers driving up food and fuel costs and disrupting trade; it estimates 1.3 million people in Sri Lanka are now struggling to meet basic food needs. Anti-Corruption Push: CIABOC has arrested 32 state officials and public servants in the first four months of 2026, spanning education, law enforcement, judiciary, local government and environmental agencies, while complaints rose to 2,686 in the same period. Parliamentary Budget Oversight: A US congressional delegation is supporting Sri Lanka’s Parliament to set up a Parliamentary Budget Office, focusing on independent, nonpartisan fiscal analysis and budget scrutiny. Fisheries Cold Chain Boost: Japan donated six refrigerated trucks to the Ceylon Fisheries Corporation and added ice-making machines in Jaffna, Mullaitivu and Trincomalee to cut post-harvest losses. Energy Policy Under Fire: Environmental groups say Sri Lanka’s LNG power plans are costly and still rely on diesel because no LNG terminal exists. Forex Fraud & Rupee Moves: Authorities probe tens of millions of dollars allegedly sent overseas for “imports” that never arrived, while the rupee edged down slightly against the USD. Trade Platform: Sri Lanka is participating in the 10th China–South Asia Expo in Kunming, highlighting South-South trade cooperation.

Trade & Policy: Sri Lanka is moving toward joining RCEP, with the Trade Ministry saying it has submitted responses to the bloc’s preliminary questionnaire and set up high-level and working committees to progress talks. Central Banking & FX: The Central Bank has ordered exporters to convert residual export earnings into rupees, alongside new gazette rules on forex conversion, as the rupee strengthens and bond yields ease. Customs & Revenue: Sri Lanka Customs collected 217.9bn rupees in May, beating its target by 16%, with first-five-month collections up about 44% year-on-year on stronger enforcement and a rebound in imports. Green Reporting & ESG: Sri Lanka launched EU-backed guidelines for its revised national green reporting system, aiming to meet rising sustainability disclosure demands. Banking & Mobility Finance: Assetline Finance and Hayleys Mobility signed an MoU to expand flexible vehicle financing; CDB partnered with Micro Cars for customised financing and insurance; Seylan Bank teamed up with Hayleys Fentons for EV leasing with fast approvals. Logistics Investment: Luxembourg-backed WEAIR Cargo Airline began operations in Sri Lanka, aiming to boost air cargo capacity and regional connectivity. Road Safety & Philanthropy: Burjeel Holdings CEO Dr Shamsheer Vayalil announced a humanitarian package for victims of a Dubai Emirates Road crash that included one Sri Lankan among the dead. Food Security Risk: The World Food Programme warns the Iran war is worsening hunger via higher fuel and food costs and disrupted supply chains, with Sri Lanka among affected countries.

IMF Update: The IMF cut Sri Lanka’s 2026 growth forecast to 3% and lowered end-2026 reserve projections to $8.645b, while allowing temporary fiscal easing after shocks from the Middle East conflict and Cyclone Ditwah. FX Rules: CBSL issued new “Repatriation of Export Proceeds into Sri Lanka Rules No. 2 of 2026”, tightening timelines for exporters to convert residual foreign earnings into rupees, with limited permitted uses first. Trade & Customs: Cabinet approved drafting a Bill to amend the Customs Ordinance, following recommendations from a Customs Affairs steering process. Rupee Moves: The rupee strengthened against the USD across several banks, with some selling rates dipping below Rs. 336. Export Competitiveness Debate: A business commentary argues rupee depreciation is not a fix for exporters, warning input costs rise and margins get squeezed. Marine Industry Push: Sri Lanka will inaugurate its first boat launching ramp (Rs. 76m) to boost marine manufacturing and export competitiveness. Tourism Linkages: Sri Lanka promoted tourism in Viet Nam ahead of new direct flights, aiming to lift arrivals and earnings. Corporate Governance: Celeste appointed Roshanie J. Moraes to strengthen governance as it scales quick commerce. Regional Trade Platform: A Sri Lankan official said the China-South Asia Expo is a key South-South trade bridge, with over 100 local firms attending. Food Security Shock: WFP warned the Iran war and Hormuz disruptions could push millions, including Sri Lanka, deeper into acute hunger as fuel and food costs surge. Business Risk Alert: Police and Customs investigations flagged a major scam involving NDB-related funds siphoned out via TT “imports” claims.

Central Bank Rules: CBSL issued an Extraordinary Gazette introducing “Repatriation of Export Proceeds into Sri Lanka Rules No. 2 of 2026”, requiring exporters to convert remaining export proceeds into rupees by the 10th day of the following month after permitted payments. Digital Economy Push: Cabinet approved drafting a Digital Economy Bill to strengthen Sri Lanka’s digital transformation, with a new legal framework covering policy, tech implementation, regulation and enforcement, including AI-related areas. Rail Disruption: Railway services face disruption tomorrow due to planned trade union action by the Sri Lanka Railway Controllers’ Union, with morning trains not reporting for duty. Public Sector Modernisation: Government railway season tickets for officials will be fully digitized from July via the Pravesha platform, with institutional registration starting now. Corporate Legal Move: Hayleys obtained an enjoining order against former MP Wimal Weerawansa over alleged defamatory statements made via social media and TV. Tourism Incentive: Sri Lanka waived tourist visa fees for visitors from 40 countries, offering a free 30-day ETA from May 25, 2026. Market Watch: CSE rebounded as lower oil prices and stronger crossings lifted sentiment; ASPI rose 0.67% and S&P SL20 gained 0.54%. Humanitarian & Food Pressure: UN-linked reporting warns the Iran war is pushing millions, including about 1.3 million in Sri Lanka, into food insecurity as trade and fuel costs worsen.

Digital Economy Push: Sri Lanka’s Cabinet has approved drafting a Digital Economy Bill to speed up digital transformation, with a new legal and institutional framework covering policy, tech rollout, regulation and enforcement, and focusing on areas like AI. Public Service Digitisation: Concessionary railway season tickets for government officials will be fully digitised from July via the Pravesha platform, with institutions registering and staff applying online. Corruption Crackdown: A former deputy minister, Sarana Gunawardena, was sentenced to 16 years in prison over graft linked to kickbacks from vendors after overpaying for vehicle and building rentals. Green Finance Training: Over 200 stakeholders were trained to apply Sri Lanka’s Green Finance Taxonomy in practice under an EU-backed initiative, aiming to channel more sustainable investment. IMF & Cyber Accountability: Parliament’s Committee on Public Finance will scrutinise the Treasury’s USD 2.5m cyber fraud case, while the IMF has backed Sri Lanka despite the Treasury cyber payment breach. Energy & Trade Watch: Sri Lanka set a 13% industrial emissions cut toward carbon neutrality by 2050, and a new petroleum pipeline plan could reshape fuel logistics and energy security. Household Credit Pressure: A study says personal loans rose 35% from Dec 2024 to Mar 2026, with consumer durable loans and pawning advances surging. FX Snapshot: CBSL daily rates put USD buying at Rs. 332.38 and selling at Rs. 342.08.

Sri Lanka’s External Sector Watch: A political debate is growing over CBSL balance-of-payments reporting, with claims of an alleged ~US$808m discrepancy raising fresh questions about foreign exchange outflows amid tight controls after the 2022 debt crisis. Market Sentiment: Colombo Stock Exchange ended the week on a bearish note as Middle East tensions triggered risk-off selling; ASPI fell about 1% and turnover stayed subdued. Financial System Update: CBSL says the banking sector stayed resilient in 1Q26, but warns systemic risks are building as the credit-to-GDP gap moves further positive and pressures persist from inflation, FX volatility, fuel/commodity costs and weather. Remittances & Reserves: Worker remittances rose to US$847m in May 2026, lifting reserves to about US$6.87bn, though the rupee still weakened year-to-date. Policy & Compliance: Sri Lanka banned single-use plastic bottles at government events from May 31 and introduced fees for plastic bags; IRCSL and FIU also ran an awareness session on national risk assessment updates for insurers. Banking & Insurance Moves: Commercial Bank opened a full-service branch in Port City Colombo; Allianz Insurance Lanka expanded customer access via Dedigama branches; HNB Life launched “Privileged Protect” universal life coverage. Trade & Ports: A U.S.-facilitated delegation explored Indian Ocean port development and digital supply-chain resilience, including visits to the Port of Baltimore. Global Shock on Food: UN’s WFP warns the Iran war is pushing millions more into hunger, with Sri Lanka flagged among affected countries.

Debt & Markets: Sri Lanka’s debt narrative is under fresh scrutiny after a rights group challenged claims of USD 8.094m paid in 2026, saying it reflects accounting totals while foreign debt rose by USD 788m in Q1 and domestic debt also climbed. IMF & Cyber Risk: The IMF granted Sri Lanka a waiver after a Treasury cyber heist led to a missed USD 2.5m external debt payment to Australia, citing corrective steps and calling the breach minor. Rupee & Investor Sentiment: Foreign investors sold about US$14.7m of government securities in the week to June 4, extending net outflows and adding pressure as the rupee weakened. Remittances: Worker remittances hit US$847m in May, up from US$641.7m a year earlier, lifting Jan–May inflows to US$3.90b. Trade & Growth: Sri Lanka’s exports face headwinds as the trade deficit widens and regional deal flow stays selective by credit quality. Business & Investment Links: Sri Lanka pushed food exports at Thailand’s THAIFEX–Anuga Asia 2026, while Korea launched an anti-corruption integrity assessment pilot with Sri Lanka’s anti-graft bodies. Energy & Cost of Living (Regional): India’s LPG price hike and West Asia-linked supply shocks continue to dominate regional energy talk, with Sri Lanka watching spillovers. Security & Accountability: A detained ex-intelligence official over the 2019 Easter attacks began an indefinite hunger strike, alleging torture and mistreatment.

IMF & Treasury Cyber Fallout: The IMF granted Sri Lanka a waiver after a $2.5m external debt payment was missed due to a Treasury phishing scam that diverted funds via fraudulent bank-detail changes, with the Fund calling the breach minor but flagging control weaknesses. State Sector Watch: Sri Lanka’s 51 SOEs posted 2025 profits of Rs. 444.4b, down 17.6%, as CEB swung from profit to a Rs. 38.7b loss, while other SOEs improved and dividends/levies rose. Trade & Market Access Risk: The US proposed a 12.5% duty on Sri Lanka imports under forced-labour concerns, putting pressure on key export sectors like apparel ahead of consultations and hearings. Public Administration Disruption: Divisional Secretaries plan to boycott Monday meetings from June 8, citing repeated scheduling clashes that violate “Public Day” rules. Transport Shock: Private bus operators say they will cut services by about 50% from June 8 over fare disputes and rising costs, prioritising only peak-hour runs. Green Reporting Push: Sri Lanka launched EU/UNIDO-backed revised National Green Reporting System guidelines aligned to GRI standards to raise corporate ESG transparency. Tourism & Visa Policy: Sri Lanka’s new tourist ETA fee waiver covers 40 countries but leaves Bangladesh out, meaning Bangladeshi visitors still pay visa fees. Port City Banking: Commercial Bank opened a full-service branch in Port City Colombo to serve businesses and investors in the new financial hub. Regional Aviation Security: CAASL chief Captain Daminda Rambukwella was appointed CASP-AP chair for 2026/27 as Sri Lanka prepares major aviation security summits.

Private Transport Dispute: Private bus operators in Sri Lanka plan to cut services by nearly 50% from June 8, running mainly during school and office rush hours after authorities failed to grant fare revision and fuel relief. Public Administration: Divisional Secretaries and Assistant Divisional Secretaries will boycott Monday meetings from tomorrow, citing repeated clashes with the “Public Day” rule that requires grievance handling. Regional Connectivity: Nepal’s PM urged BIMSTEC members to deepen cooperation on transport, trade and digital connectivity while tackling climate change and disasters. Aviation Security: Sri Lanka’s CAASL chief Captain Daminda Rambukwella was appointed Chairman of the Asia-Pacific Aviation Security Programme for 2026/27, ahead of major regional aviation security summits in Colombo. Food Security Watch: The UN WFP warns the Iran-linked Middle East crisis is pushing millions into acute hunger, including Sri Lanka, as funding shortages and higher food and fuel costs bite. Higher Education Input: Sri Lanka’s Education Ministry launched a nationwide public consultation and online survey to shape a new higher education policy framework. Health Screening: Doctors urged early blood screening for inherited blood disorders like thalassaemia to help couples make informed family planning decisions. Energy Pressure Context: Global fuel-price stress tied to Strait of Hormuz disruptions continues to raise costs and squeeze household budgets worldwide.

Corporate Earnings: Aitken Spence closed FY26 with a strong Profit Before Tax of Rs. 12.8 bn, driven by overseas operations (61% of profits) and a jump in equity-accounted investee contributions. Central Banking & FX: A new push to contain rupee weakness is debated alongside CBSL’s latest reserve update—gross official reserves rose to US$ 6.87 bn in May. Monetary Policy Critique: Commentary argues CBSL’s recent rate moves were reactive, urging more proactive decisions aligned with IMF targets on private credit growth. Agriculture & Food Security: Experts warn bee declines could hit Sri Lanka’s food output and farmer incomes, while another debate flares over rice imports and their impact on paddy prices. Climate Risk: El Niño is now seen as near-certain, with the next 90 days flagged as crucial for Maha planning and water stress. Trade & Investment: Sri Lanka is moving ahead with joining RCEP, while business-to-business talks spotlight hydropower, tourism and herbal industries. Policy & Compliance: EU-backed revised National Green Reporting System Guidelines were launched to strengthen ESG reporting. Public Safety & Crime: A call for stronger national oversight follows rising cybercrime arrests tied to organised scam operations. Transport Policy: Customs says vehicle import surcharges haven’t meaningfully reduced imports, despite expectations. Social Sector: HelpAge received new collection tills from Seylan Bank to fund free cataract surgeries for underprivileged elderly.

Vehicle Policy Check: Customs says the 2026 vehicle import surcharge hasn’t meaningfully cut volumes, with vehicle imports still driving over 30% of Customs revenue—raising questions on whether the FX-saving goal is being met. Reserves Update: CBSL reports gross official reserves rose to US$ 6.873bn in May (up 1.6%), including a People’s Bank of China swap facility. US Forced-Labour Tariffs: Sri Lanka’s Finance Deputy Minister says talks with the US on reciprocal tariffs and forced-labour supply-chain concerns are ongoing, and any proposed 12.5% duty can be removed if safeguards are in place. Investment Push: BOI launches a “Ready to Invest” digital platform with 30 structured projects to speed approvals and attract foreign capital. Climate/Reporting: EU-backed revised National Green Reporting System Guidelines were launched to align Sri Lanka’s ESG reporting with global standards. Food Security Shock: UN WFP warns the Iran war could push an extra 1.3m people in Sri Lanka into acute hunger as energy and food prices rise. Health & Safety: A nursing home fire case highlights alleged “chained” patients among 13 deaths, intensifying scrutiny of unregistered care facilities. Agriculture Risk: Experts warn bee declines from pesticide-heavy farming could hit yields and raise costs. Social Sector: Seylan Bank donated collection tills to HelpAge to fund free cataract surgeries for destitute elderly.

Green Reporting Push: Sri Lanka launched EU-backed revised green reporting guidelines, updating the National Green Reporting System to align with Global Reporting Initiative (GRI) standards and help firms produce comparable ESG data for international markets. Agriculture Finance: HNB and Hayleys Agriculture Holdings signed a partnership to expand leasing for modern farm machinery, including Kubota and Agrotech tractors and combine harvesters. Insurance for Export Zones: Ceylinco Life partnered with FTZMA as insurance service provider, offering customised health and retirement-linked packages for FTZMA member employees. Climate Risk Warning: The Centre for Environmental Justice warned Sri Lanka could become “climate orphans” as El Niño conditions are expected, stressing weak measurement and damaged watersheds/wetlands. FX & Rupee Narrative: Deputy Finance Minister Dr. Anil Jayantha Fernando said rupee depreciation is not an economic crisis, pointing to global fuel-driven dollar moves and adequate export/tourism/remittance inflows. Energy & Prices: LAUGFS Gas kept June LPG cylinder prices unchanged despite higher global costs. Market Mood: Sri Lankan shares extended losses to a fifth session, with the CSE All Share index down slightly and a weekly decline of 2.6%. Maritime Security: The US commissioned SLNS Samudravijaya, a former US Coast Guard cutter, boosting maritime cooperation for trade-route security.

IMF Watch: Sri Lanka’s IMF reviews are done for now, with the lender saying any successor programme after the current EFF ends is still “to be discussed,” while opposition figures push for talks to start immediately. Food Security: The UN World Food Programme warns the Middle East conflict is already driving millions toward hunger, citing higher fuel and transport costs, food price spikes and aid shortfalls, with Sri Lanka among the hardest hit. Energy & Trade Shock: Separate reporting links the Strait of Hormuz disruption to Asia’s energy stress, while India and other regional economies respond differently to protect supply and inflation. Power Sector Upgrade: Sri Lanka is moving ahead with its biggest battery storage push—BESS at 16 transmission substations—to improve grid stability and better manage solar and wind variability. Construction Stress: Sri Lanka’s construction sector faces a slowdown as about 40% of firms become inactive amid VAT hikes, rupee depreciation and shifting tax policies. Banking & Policy Debate: Opposition MP Ravi Karunanayake alleges leaked plans to restructure Bank of Ceylon and People’s Bank via public share offers, while warning US forced-labour export tariffs could hurt Sri Lanka’s trade. Apparel Exports: SLCGE proposes an industry “Design Hub” to help SME apparel makers reach international buyers, alongside an EDB seminar on export procedures, costing and financial facilities. Governance & Institutions: CA Sri Lanka felicitates the first woman Auditor General, Samudika Jayaratna, as the profession marks a milestone in public audit. Business Updates: Hayleys Mobility launches the JAECOO J5 HEV hybrid SUV in Sri Lanka; Capital Trust renews its property marketing partnership with John Keells Properties; Cinnamon Life’s offices win GreenRE Gold certification.