AGP Executive Report

US Forced-Labour Tariffs: The U.S. Trade Representative has named Sri Lanka among 60 economies in a Section 301 forced-labour probe, proposing an extra 12.5% duty on Sri Lanka-bound imports, with a July 7 public hearing. Fuel Price Pressure: Sri Lanka’s pump prices are rising amid global oil shocks and rupee weakness; the government says a Rs. 57bn subsidy cushion is in place, while critics blame coal import and power-generation mismanagement. Weather Risk for Industry: Sri Lanka’s Meteorology Department warns El Niño could cut rainfall in July–August, raising risks for agriculture, water, power and public health. Energy Infrastructure: Sri Lanka is set to commission its biggest battery energy storage rollout yet—40MWh systems at multiple substations to stabilise the grid and support renewables. ICT Exports: The Computer Society of Sri Lanka says ICT exports have become the country’s third-largest export earner, driven by software, digital services and cybersecurity. Fisheries Skills Link: Sri Lanka and Japan agreed to create technical employment pathways in Japan for Sri Lankan fisheries graduates and deepen fisheries value-chain cooperation. Tourism Investment: BOI and Vella Group signed a USD 5.1m deal to expand Ella’s 98 Acres Resort & Spa, adding villas, rooms and about 150 jobs.

Fuel & Power Policy: Cabinet says the latest fuel price hike is unavoidable to keep supplies uninterrupted, with the Treasury and importers absorbing losses via subsidies; it also insists the public won’t pay for substandard coal imports, with recovery steps and possible legal action against responsible firms. Electricity Billing Clarity: Consumers are warned about scam messages using CEB/LECO names after the CEB was legally dissolved and responsibilities moved to EDL, raising questions on the authenticity of “bill settlement” requests. Energy Storage & Renewables: Sri Lanka plans its largest battery energy storage rollout, with grid-forming BESS units (40MWh each) to support stability and help reach 70% renewable generation by 2030. Industrial Competitiveness: EU-backed work is pushing Eco-Industrial Parks to help manufacturers meet sustainability demands and cut costs; separate commentary calls for a national sustainable industries framework for SME apparel to stay export-competitive. Tourism & Investment: Tourism arrivals topped one million in 2026 (1,022,022 by end-May); BOI signed a USD 5.1m deal to expand 98 Acres Resort & Spa in Ella, targeting new villas, rooms and jobs. Trade & Supply Chains: FLAG’s new Chennai–Singapore subsea cable route entered commercial service, boosting resilience for cloud and data-heavy business traffic. Governance & Finance: CBSL launches a “Be Scam Proof” campaign as fraud schemes evolve; OECD–ADBI insurance and retirement savings roundtable begins in Colombo. Agriculture Pressure: Farmers’ union warns agriculture faces collapse under IMF-influenced policies and rising imports.

IMF & Fuel Pricing: Sri Lanka’s IMF reviews cleared, releasing US$695m, but fuel price revisions are already feeding fresh cost-of-living pressure as inflation risks rise toward 7% on fuel-driven demand. Transport Costs: Private bus operators are weighing whether to seek fare relief after diesel hikes, with industry warning services may become unsustainable. Agriculture & Food Security: The CWE has allocated Rs. 1 billion to improve paddy drying and storage, plus extra machinery support for cooperatives, while officials also discuss rice import needs. Energy & Environment: Cabinet approved a national plan and digital platform to respond to oil and hazardous chemical spills, as shipping and port activity grow. Ports & Logistics: SLPA cautions that Trincomalee port expansion plans must be backed by real commercial demand and feasibility, not just master-plan ambition. Investment Push: Western Province Governor Hanif Yusoof met US officials to attract investment in ports, logistics, energy and data centres, urging openness to unlock FDI. Trade & Standards: IBCSL will lead a delegation to China-South Asia standards talks in Chengdu to help exporters cut non-tariff barriers. Workplace & Industry: HNB added three directors, while LOLC and CIC reported strong FY26 operating performance amid sector resilience.

Marine & Hazard Response: Cabinet approved a new National Plan and a digital platform to respond to oil and hazardous chemical spills, expanding MEPA’s updated response plan as ship traffic and port activity grow. Inflation Watch: CBSL Governor Nandalal Weerasinghe said inflation could edge toward 7% if fuel-price pressure persists, prompting vigilance after the policy rate was raised to 8.75%. IMF Update: IMF completed the Fifth and Sixth Reviews under the EFF, releasing US$695m and keeping Sri Lanka’s recovery on track, though risks remain. Boardroom Moves: HNB appointed three directors, including a representative linked to Ceylon Steel, as the bank strengthens governance. Conglomerate Performance: LOLC Holdings reported strong FY26 operating growth, while CIC Holdings posted steady revenue and profit gains despite cyclone-linked disruptions. Construction & Industry Events: INFRACON 2026 (3-5 July) will spotlight HVAC-R, power/energy, green grid, safe water and build materials. Standards for Exports: IBCSL will lead a delegation to a China–South Asia standards conference in Chengdu to cut non-tariff barriers for Sri Lankan exporters. Transport Cost Pressure: Private bus operators plan talks over diesel-driven cost stress after fare revisions were not approved. Energy Pricing Reform: IMF-linked confirmation says Sri Lanka achieved cost-reflective pricing for electricity and fuel, supporting programme benchmarks. Sustainable Finance: CSE partnered with the EU Green Recovery Facility to build momentum for GSS+ bond issuance. Agri & Animal Health: Mannar Island ran a rabies control drive with hundreds of sterilizations and vaccinations.

Tourism Investment: Uva Greenlands Estate (Pvt) Ltd signed a USD 5.1m BOI deal to expand Ella’s 98 Acres Resort & Spa in two phases over 36 months, targeting about 150 direct jobs and a stronger ultra-luxury positioning. Energy Pricing Reform: The IMF confirmed Sri Lanka has met cost-recovery pricing for both electricity and fuel under the EFF, a key step for the next Executive Board review. Fuel Cost Pressure: CPC said a Rs 57bn fuel subsidy allocation ends by June, while retail fuel prices were raised again amid West Asia conflict; the government is also tightening QR fuel distribution to cut consumption and protect foreign exchange. Environment & Land Use: Sri Lanka will gazette five forest reserves in Anuradhapura on June 5 under the “Wanaspathi” programme, including protection for the Ellanga wewa cascade system and new elephant corridors. Trade & Exports: Export Development Board data show April export earnings at US$ 1.38bn and US$ 5.784bn for the first four months, with tea a major contributor. Market Watch: Sri Lankan shares slipped as health care, industrials and energy dragged sentiment, with foreign investors net selling. Corporate Moves: Hayleys agreed to sell Maldives resort assets linked to NH Maldives Kuda Rah for USD 17.25m, after recognising an impairment tied to the disposal.

IMF-linked fuel shock: Sri Lanka raised retail fuel prices again after the latest IMF instalment, with petrol 92 up to Rs. 434 and diesel to Rs. 407, stoking fresh cost-of-living and inflation worries. Gig work protections: A Sri Lanka policy think tank urged the country to shape an ILO platform-economy standard so flexibility doesn’t mean zero protection for ride-hailing and delivery workers. Economic policy debate: Cardinal Malcolm Ranjith questioned Sri Lanka’s open-market model and the IMF path, arguing import dependence has weakened local production and pushed up household hardship. FDI push: BOI launched a “Ready to Invest” digital platform showcasing $3bn+ in investor-ready projects across tourism, manufacturing, logistics, ICT, renewables and agro-processing, after $1.06bn FDI inflows in 2025. Infrastructure momentum: Construction of Central Expressway Phase II (Rambukkana–Galagedara) begins, with Rs. 112bn+ in contracts and domestic funding aimed at boosting trade and regional activity. Exports in focus: April export earnings rose to $1.38bn, lifting first-four-month totals to $5.784bn, with tea a key contributor. Tourism strategy: Resplendent Ceylon’s sales push highlights India as a major market and the push to market Sri Lanka as year-round, not just seasonal. Connectivity upgrade: Dialog Axiata launched 5G-powered “Air Fibre” Wi‑Fi for high-speed broadband without cables, targeting homes and small businesses. Business orders: Sathlokhar Synergys E&C Global secured additional Rs. 125cr (ex-GST) orders, lifting its FY27 confirmed order book to Rs. 840.22cr. Tea diplomacy: Sri Lanka’s embassies and the Tea Board marked International Tea Day with events promoting Ceylon Tea and supporting community-linked sustainability. Justice and environment: The X-Press Pearl disaster ruling has reignited debate over accountability and procedural fairness in Sri Lanka’s institutions.

Central Expressway Push: President Anura Kumara Dissanayake is set to inaugurate construction of Central Expressway Phase II (Rambukkana–Galagedara) tomorrow, with Cabinet-approved Rs. 112bn contracts for 18.65 km and full domestic financing via competitive bidding. FDI Drive: The BOI launched “Ready to Invest,” a digital portal listing 30+ investor-ready projects worth over $3bn across eight sectors, after $1.06bn FDI inflows in 2025 and $1.9bn in projects nearing operations. Energy Costs & IMF Conditions: Sri Lanka raised retail fuel prices by up to 6% (petrol to 434; diesel to 407) following the IMF’s $695m instalment, with fuel subsidies pledged to be phased out by September. Power Grid Upgrade: Six large battery energy storage units have arrived in Colombo, starting a 16-unit/160MW rollout to stabilise the grid and better integrate renewables; meanwhile, rooftop solar users were asked to switch off temporarily to prevent surplus generation issues. Port & Logistics Activity: At Port of Trincomalee, three-vessel simultaneous operations began at Ashroff Jetty, including wind turbine towers, steel rods for re-export, and 55,000 tonnes of coal. Construction “Project Paradox”: Industry reports show new orders remain strong, but execution is slowing as contractors struggle with rising fuel, imported materials, transport costs, and supply disruptions—pushing demands for price revisions. Eastern Fisheries Support: Japan/FAO-backed funding worth $1.33m will modernise inland aquaculture in the Eastern Province with cage culture and fish-breeding upgrades after extreme weather impacts. Foreign Investor Outreach (Germany): German business leaders and officials urged faster Sri Lanka reforms and policy consistency, pointing to opportunities in logistics, maritime, renewables and tourism. BOI/Investor Platform (repeat): The “Ready to Invest” portal also enables online applications, tracking approvals, payments and documents for faster engagement. Maritime/Trade Pressure: External-sector data points to a wider trade deficit in Jan–Apr 2026, driven by higher fuel and vehicle imports, raising sustainability concerns under the IMF programme.

Port & Logistics: SLPA Chairman Dr. Parakrama Dissanayake says Colombo Port is nearing full capacity after 22% throughput growth in April, but expects ECT to lift capacity to 14m TEUs and Hambantota by 2m TEUs next year; he also flagged up to $2bn in port and logistics investments via PPPs, plus a new logistics hub plan with EOIs for 14 acres inside Colombo Port. Energy Storage: Sri Lanka received the first commercial-scale Battery Energy Storage Systems shipment at Colombo Port—six units under a 16-system, 160MW programme—aimed at storing solar daytime power and dispatching during peak demand. Business & Trade: Dialog Axiata overtook John Keells Holdings to become the most valuable listed company on the Colombo bourse, while JKH reported a 218% profit jump to Rs. 6.31bn for the March 2026 quarter, driven by retail, transport and leisure including NEV deliveries. Investment Promotion: Sri Lanka launched phase two of the State Plantation Asset Programme, offering underutilized plantation lands and assets for tea factories, agro-tourism, renewable energy and value-added agriculture, open to local and foreign investors. Industry & Services: Volkswagen entered Sri Lanka via Continental Cars and Commercials, launching India-made Taigun and Virtus and opening a new 3S facility in Sri Jayewardenepura Kotte.

IMF Support & Reform Push: Sri Lanka’s Ceylon Chamber of Commerce welcomed IMF approval of the 5th and 6th reviews, saying the US$695m lifeline depends on keeping structural reforms on track to protect stability and investor confidence. Rupee Pressure Explained: Former CBSL Governor Indrajit Coomaraswamy said recent rupee weakness is mainly driven by external shocks from the Middle East conflict, arguing markets overreacted despite stronger post-2022 policy frameworks. Monetary Policy Watch: With inflation risks still in focus, Sri Lanka’s policy stance remains under scrutiny as officials and analysts flag the need for vigilance if price pressures persist. Fuel Pricing Outlook: CPC said no fuel price drops are expected in the upcoming revision, citing higher international rates after the Middle East conflict; a WTI crude shipment has arrived and more crude is due soon. Corporate & Market Signals: Dialog Axiata regained the top spot on the Colombo bourse by market cap, overtaking JKH after 11 years, while shares rose on broad sector gains. Industry & Investment: Sri Lanka launched the second phase of its State Plantation Asset Programme, offering plantation lands, tea factories, bungalows, agro-tourism and renewable energy ventures to local and foreign investors. Transport Infrastructure: Construction began on the Rambukkana–Galagedara section of the Central Expressway, adding 18.7 km under the next project phase. Automotive Launch: Volkswagen entered Sri Lanka via Continental Cars and Commercials, starting with India-made Taigun and Virtus models and a new 3S facility. Food & Agriculture: Pelwatte launched a Rs. 1.86bn liquid milk expansion project, while Sri Lanka also tightened food safety rules after an EU warning. Trade & Logistics: Colombo port expansion plans are gathering pace with a US$2bn pipeline, supporting wider shipping and logistics ambitions.

Central Expressway build: Sri Lanka has officially started construction of the Rambukkana–Galagedara section of the Central Expressway, an 18.7 km stretch under Phase 2 of Segment 3, with the first phase (Pothuhera–Rambukkana) under construction and targeted for mid-2027 completion. IMF momentum for industry: The Ceylon Chamber of Commerce welcomed IMF Extended Fund Facility approval for Sri Lanka’s 5th and 6th reviews, saying continued IMF engagement is key for macro stability, investor confidence, and reforms that back private-sector growth. Fuel pricing pressure: CPC says no fuel price drops are expected in the upcoming revision, with global rates still higher than pre-conflict levels and a final decision pending. Ports & logistics investment: Sri Lanka Ports Authority flagged an up-to-US$2bn maritime and logistics investment pipeline over 1–3 years to move from transshipment toward a full logistics hub. Trade facilitation: FTZMA raised concerns with BOI over 18% VAT on raw materials for indirect/deemed exporters and pushed for practical VAT exemptions/zero-rating mechanisms. Tourism access: Sri Lanka waived visa fees for visitors from 40 countries via a free ETA scheme. Business & markets: Sri Lankan shares rose as sectors gained; Asian Paints reported a strong Q4 rebound, and DB Automation won Zebra Technologies’ Partner of the Year award. Energy & environment: Flamingo deaths from power-line collisions in Mannar underline risks around power infrastructure near wetlands.

IMF Update: The IMF says Sri Lanka’s recovery is losing momentum as Middle East war-linked oil costs, weaker tourism and post-cyclone disruptions reignite inflation risks, projecting growth to slow to 3% in 2026 from 5% in 2025. Monetary Policy: The CBSL’s sharp 100-bp rate hike to 8.75% is aimed at macro-stability as the rupee faces renewed pressure and dollar demand shocks. Energy & Fuel: CPC says fuel prices may not fall at the next revision, even as a WTI crude vessel has arrived and another Murban tanker is due by May 31; separate coverage also flags Sri Lanka’s energy crisis as a systems and execution problem, not a lack of resources. Trade & Industry: Sri Lanka tightens food safety rules for EU-bound exports via SL-GAP certification after pesticide residue concerns; Pelwatte moves ahead with a Rs. 1.86b liquid milk expansion. Ports & Logistics: SLPA outlines a US$2b maritime and logistics investment pipeline to upgrade Colombo’s role as a logistics hub. Essential Services: Gazette extends “Essential Services” to keep key sectors running during recovery. Business & Finance: Vehicle financing partnerships expand for BAIC/GWM and NEV buyers, while SLICGL launches a digital motor insurance app. Entrepreneurship & Branding: NCE pushes for a timeline on Sri Lanka’s Madrid Protocol accession; CCWE readies a women-focused fashion week and summit in July. Social Impact: Rising sanitary product prices are blamed on taxes, currency depreciation and costs, driving “menstrual hygiene insecurity” for rural women and schoolgirls.

IMF Lifeline: The IMF approved two Sri Lanka programme reviews, unlocking US$695m under the EFF as growth is projected to slow to about 3% amid Iran-war fuel shock; the IMF also flagged missed reform targets and warned against new external arrears and tighter import curbs. Monetary Tightening: The CBSL raised the policy rate by 100 bps to 8.75%, citing inflation and rupee pressure from higher energy costs. Forex Friction for Trade: SMEs are urging a temporary ban on non-essential imports, while businesses complain Customs kept a high Rs.351.17 per dollar for import valuations despite rupee stabilization—fueling a fresh import-cost dispute. Power Sector Reform: Accountants and policymakers warned that CEB restructuring under the Electricity Act needs more than laws, with operational and financial realities now in focus. Tea Industry Spotlight: Amnesty says private-estate tea workers may face forced-labour conditions; meanwhile Sri Lanka’s embassies and consulates marked International Tea Day with Ceylon tea showcases. Standards & Consumer Safety: Swadeshi Khomba Baby Soap received SLS certification under the mandatory baby soap standard. Logistics Growth: Tiger Logistics reported 34.5% container volume growth in FY26, pointing to resilience despite global trade uncertainty.

IMF Boost: The IMF approved Sri Lanka’s Fifth and Sixth EFF reviews, unlocking about US$695m (SDR508m) and keeping the programme on track, while flagging risks from the Iran-war hit to energy costs and noting some missed conditions on arrears and import restrictions. Monetary Tightening: Sri Lanka’s central bank delivered a 100 bps policy rate hike to 8.75%, aiming to protect FX reserves and inflation as fuel and import pressures rise. FX Calm After Panic: CBSL data show the rupee’s YTD depreciation jumped sharply in mid-May, but it later rebounded, with Bloomberg calling it Asia’s best-performing currency after CBSL moved to restore calm. Energy Security Push: Cabinet approved “Surakimu Lanka” to strengthen energy security and cut the fuel import burden, as Sri Lanka also received its first commercial-scale BESS battery system via Colombo Port. Tea Industry Spotlight: Sri Lanka’s embassies in Korea and elsewhere marked International Tea Day with Ceylon tea showcases, underlining tea’s role as a major export and heritage industry. Community Water & Sanitation: Rotaract-led “Project Flowing Hope” improved water pumps, pipelines and sanitation at under-resourced rural schools in Central Province. Sports & Tourism Link: Cricket West Indies set the 2026 home season with Sri Lanka, New Zealand and Pakistan tours across the Caribbean, while Cordelia Cruises announced renewed sailings including Sri Lanka ports.

IMF Support: The IMF completed Sri Lanka’s Fifth and Sixth EFF reviews, unlocking about US$695m (SDR508m) and bringing total disbursements to roughly US$2.4bn, with progress noted but warnings on external arrears and import-restriction commitments. Monetary Tightening: The Central Bank delivered a surprise 100 bps rate hike to 8.75% as inflation and rupee pressure intensified amid Iran-war-linked fuel costs, with analysts warning against over-tightening that could choke credit and growth. Energy Security Push: Cabinet approved “Surakimu Lanka” to boost energy security and cut the fuel import burden, while Japan pledged fresh demining funding of about US$1.34m for Northern and Eastern Provinces. Agri-Exports Rule Change: Sri Lanka made EU fresh fruit and vegetable exports mandatory via SLGAP-certified farms, registered exporters, and approved processing/packing facilities after EU residue concerns. Digital Payments: Sampath Bank launched PayPal integration via Sampath Vishwa to expand secure global payment access. Banking Stability: SLBA said recent fraud incidents are isolated and do not threaten customer deposits, urging banks to review controls. Industry & Trade: Reports highlight construction cost pressures and cement pricing disputes, while apparel and export performance remain mixed under weaker global demand.

Monetary Shock: Sri Lanka’s central bank delivered a first tightening in three years, lifting the policy rate by 100 bps to 8.75% as Iran-war oil pressure feeds inflation and strains the rupee. Fuel Calm, Energy Push: CPC says fuel stocks are sufficient until end-July, while Cabinet approved “Surakimu Lanka” to cut fuel-import vulnerability through demand management and efficiency. FX Anxiety Meets Official Guidance: CBSL warned the public not to be misled on “money printing” claims as the rupee’s slide stoked panic buying. Market Pressure on Imports: A vehicle-import dispute is back in focus after a May 15 50% customs surcharge—plus a separate police directive telling motorists not to use altered number plates, even as nearly 400,000 official plates remain pending. Business Signals: BOI launched a “Ready to Invest” digital platform for project-ready opportunities, and exports posted their strongest April on record, even as apparel demand softens.

Monetary Tightening: Sri Lanka’s central bank has shocked markets with a full 100-basis-point hike to 8.75% as Middle East-driven oil costs keep inflation elevated (April at 5.4%) and the rupee stays under pressure. Energy Security Push: Cabinet approval for “Surakimu Lanka” aims to cut waste and shift demand toward renewable-heavy hours, while Sri Lanka also received its first commercial-scale BESS through Colombo Port to stabilise the grid. Trade & Cost of Living: With fuel supply said to be stable into July, authorities are still watching inflation risks—while vehicle import costs and policy changes are expected to keep mobility pricey. Banking Confidence: The banks’ association says deposits remain safe after recent fraud and cyber incidents, with losses absorbed by institutions. Business & Investment Signals: Sampath Bank rolls out PayPal connectivity, and the Sri Lanka–German Business Forum is set to spotlight maritime and logistics ties. Tourism Boost: Visa fees are waived for travellers from 40 countries, effective 25 May.