Lahiru creates history with Youth Olympic silver
Sri Lanka fall for the green top trap
The infrastructure crisis at state universities
Revatha, Anuradhapura Central clash in U19 Division Two semi-final
Pakistan field four debutants for first Test; Sri Lanka opt to bowl
By Rashmi Anupama and Kalani Kiriveldeniya, Research Assistants, Institute of Policy Studies of Sri Lanka (IPS)
Sustaining Sri Lanka’s post-crisis macroeconomic stability requires productivity-enhancing reforms to achieve durable and inclusive growth. Against this backdrop, the Institute of Policy Studies of Sri Lanka (IPS) hosted a roundtable discussion on 14 October 2026 on its flagship publication, Sri Lanka State of the Economy 2026, to discuss policy priorities to rebuild the country’s economic foundations amidst ongoing domestic and global uncertainties.
IPS Research Fellows Dr Asanka Wijesinghe and Dr Lakmini Fernando presented key findings, followed by interventions from Dr Yashodha Senadheera, Deputy Director of the Economic Research Department of the Central Bank of Sri Lanka (CBSL); Dr Liliya Aleksanyan, Senior Country Economist for Sri Lanka at the Asian Development Bank (ADB); Sanjaya Ariyawansa, Senior Economist at Sampath Bank; and other invited parties.
Growth Has Returned, but Can Sri Lanka Sustain It?
Dr Asanka Wijesinghe discussed Sri Lanka’s macroeconomic performance, external sector competitiveness, and policy priorities for durable growth. He highlighted that while the economy’s recovery has been satisfactory, sustained annual growth of approximately 8.3% between 2026 and 2030 would be required to regain the pre-crisis growth trajectory. Against this background, Sri Lanka needs to accelerate reforms towards achieving stated medium-term growth target of 7% or above.
Rising global fuel prices and the resulting external sector pressures pose an immediate challenge to Sri Lanka’s economic growth. Sri Lanka recorded a Gross Domestic Product (GDP) growth of 4.2% in the second quarter of 2026, with increased contribution of investment to economic output. However, the increased import bill has been a drag on output growth. The merchandise trade deficit widened considerably during January–August 2026, when compared to 2025.
Improvements in fiscal consolidation and debt management have given Sri Lanka breathing space amidst a hostile external sector. Dr Wijesinghe stressed the need to maintain fiscal discipline, strengthen external competitiveness, and continue engagement with international financial institutions as the country rebuilds its resilience.
Strengthening Export Competitiveness
Dr Wijesinghe emphasised that expansion of exports is essential for achieving 7% economic growth, as growth driven primarily by domestic demand has its limitations.
Sri Lanka’s reliance on non-reciprocal preferential market access faces growing challenges as competing economies negotiate reciprocal trade agreements. For example, Indonesia’s preferential access to the European Union (EU) and India’s trade agreement with the United Kingdom (UK) could weaken Sri Lanka’s competitiveness. This challenge could be further compounded by the potential loss of existing preferential arrangements for Sri Lanka, including the Generalised Scheme of Preferences Plus (GSP+).
Securing more predictable tariff regimes in major export markets is a necessary precondition, and it requires accelerating tariff reforms and simplifying the tariff structure. However, these reforms must be carefully sequenced, as sudden reductions in tariff protection could adversely affect domestic industries, particularly Small and Medium Enterprises (SMEs). He also recommended a dedicated fund to support trade adjustment.
Reorienting Fiscal Policy Towards Long-Term Growth
Building on these discussions, Dr Lakmini Fernando explained how fiscal policy could support durable growth beyond the current International Monetary Fund (IMF) programme. During the adjustment period, government capital expenditure declined to historically low levels, constraining the scope for public investment to support long-term growth and development.
Achieving 7% economic growth could require gross fixed capital formation equivalent to approximately 30–42% of GDP, depending on investment efficiency. Mobilising such investment also requires a supportive environment for private investment alongside productive public expenditure.
She also highlighted the need to prioritise education, healthcare, skills development, social protection, climate-resilient infrastructure, and green investment to meet evolving future demand. Improving public financial management, strengthening project implementation capacity, and ensuring transparent and competitive procurement were also identified as essential reforms.
On debt sustainability, Dr Fernando stressed adhering to a medium-term debt management strategy, strengthening fiscal institutions, and exploring innovative financing. Continued engagement with international financial institutions could ease financing pressures. She also highlighted the importance of long-term planning and consistent implementation.
Expert Perspectives: Monetary Stability, Economic Resilience, and Emerging Shocks
Dr Yashodha Senadheera elaborated on the Central Bank’s monetary policy response to external supply-side shocks. She explained that although monetary policy has limited capacity to directly address supply-driven inflation, intervention may become necessary when such shocks generate persistent inflationary pressures or threaten inflation expectations. Maintaining price stability while considering broader economic conditions therefore requires careful, data-driven policy decisions.
Dr Liliya Aleksanyan highlighted the lasting effects of successive crises and global energy-price volatility, emphasising the need for greater energy security through renewable energy. She also encouraged Sri Lanka to explore Asian export markets like India, alongside traditional markets such as EU and the United States of America (USA). Additionally, she highlighted the importance of preparing for emerging technologies such as artificial intelligence
Sanjaya Ariyawansa focused on revenue mobilisation and climate risks. He called for improvements in tax administration, integration of SMEs into the tax system, and independent fiscal oversight. He also urged closer assessment of how climate-related shocks could affect agriculture, energy, public expenditure, and banking sector stability to strengthen preparedness and resilience.
From Policy Recommendations to Implementation
The subsequent roundtable discussion further explored several themes raised during the presentations and expert interventions. Participants discussed the assumptions underlying growth projections, the investment required to achieve higher growth, and opportunities to strengthen revenue mobilisation. To overcome the persistent gap between budgetary allocations and actual expenditure, participants also focused on improving the efficiency and timely utilisation of public investment.
The discussion also explored fiscal responses to energy price shocks, the importance of supporting industries affected by tariff reforms, and the potential contribution of innovative climate financing instruments. Participants underscored that strengthening institutional capacity and anticipating risks are equally important as designing appropriate policies.
The growth trajectory demands complementary reforms across macroeconomic management, international trade, public investment, fiscal institutions, and climate resilience. Ultimately, Sri Lanka’s long-term economic prospects will depend both on identifying the right policy priorities and implementing them consistently. As emphasised throughout the discussion, durable growth requires a forward-looking development strategy that strengthens the country’s capacity to withstand future shocks while delivering sustained improvements in economic well-being.
ECCSL celebrates 30 years of resilience, achievement and a new chapter
Stock market rattled by oil supply chain disruptions
Your email address will not be published. Required fields are marked *
Save my name, email, and website in this browser for the next time I comment.
AIA Group Limited (the Company) announces value of new business (VONB) for the third quarter ended 30 September 2026. Growth rates are shown on a constant exchange rate basis.
• VONB for the first nine months of 2026 was up by 5 per cent to US$4,627 million, driven by growth across all reportable segments except Thailand.
• VONB in the third quarter was lower by 5 per cent to US$1,415 million against exceptionally high prior year July and August comparatives in Hong Kong and the Chinese Mainland.
• The Group returned to excellent year-on-year VONB growth of more than 25 per cent in September. We expect strong momentum in the fourth quarter, supported by the normalisation of comparative effects.
• As announced with our 2026 interim results, we expect to exceed our 9 to 11 per cent operating profit after tax (OPAT) per share CAGR target from 2023 to 2026.
Lee Yuan Siong, AIA’s Group Chief Executive and President, said:
“AIA delivered VONB growth of 5 per cent for the first nine months of 2026, despite exceptionally high prior-year sales in Hong Kong and the Chinese Mainland that affected third-quarter growth. Group VONB rebounded strongly in September, delivering year-on-year growth of more than 25 per cent.
“We continue to see attractive growth opportunities across our markets. Demand for protection, health, savings and retirement solutions remains strong, and we are investing in our competitive advantages to capture this. Agency fundamentals continue to strengthen, with higher numbers of active agents, new recruits and new leaders year-on-year, alongside deeper engagement with our bank partners.
“We entered the fourth quarter with strong momentum and remain confident in our outlook. As announced with our 2026 interim results, we expect to exceed our 9 to 11 per cent OPAT per share CAGR target from 2023 to 2026, demonstrating how our profitable new business growth translates into increased earnings and long-term value for shareholders.”
Fitch Ratings has upgraded Commercial Bank of Ceylon PLC’s National Long-Term Rating to ‘AA(lka)’ from ‘AA-(lka),’ effective 30th October 2026, reinforcing the Bank’s position as Sri Lanka’s benchmark private-sector lender and highlighting its enduring financial strength.
The upgrade follows Fitch’s recalibration of Sri Lanka’s national rating low credit scale after the sovereign rating upgrade in September 2026, while also reflecting the scope for greater positive differentiation of Commercial Bank’s credit profile relative to large private-sector banking peers.
The ‘AA(lka)’ rating signifies very high credit quality and very low default risk relative to other issuers in the country, providing an important signal of the Bank’s strong capital adequacy, liquidity, and asset quality to investors, depositors, corporate customers and international banking partners.
Fitch’s assessment recognises Commercial Bank’s longstanding position as Sri Lanka’s largest private-sector bank, its sustained advantages in business generation and funding, and its optimised cost of funds relative to other large private-sector banks. The Bank’s asset quality, profitability and capital coverage of net impaired loans have also generally remained among the stronger levels within the range of rated local banks, the rating agency noted.
“Any rating upgrade of this nature is significant for stakeholders,” Sharhan Muhseen, Chairman of Commercial Bank noted. “For our customers, the upgraded rating provides an additional indicator of the Bank’s stability and financial strength in safeguarding their investments and assets. For businesses and individuals seeking financing, the Bank’s strong institutional creditworthiness and funding advantages underpin its capacity to offer competitive financing solutions and support their diverse growth ambitions.”
Commenting on the upgrade, Sanath Manatunge, Managing Director/CEO of Commercial Bank, said: “This rating upgrade is a powerful affirmation of the financial resilience, disciplined risk management and enduring strength of Commercial Bank. It validates the deep confidence our customers, investors and international partners place in us, and strengthens our capacity to support Sri Lanka’s businesses, households and economic progress.”
The stronger credit profile also reinforces Commercial Bank’s international correspondent banking relationships, supporting the continuity and efficiency of cross-border banking, trade finance and capital repatriation services for customers engaged in international trade, the Bank said.
While the rating action was directly prompted by the recalibration of Sri Lanka’s national rating scale following the sovereign upgrade, it also positions Commercial Bank as a key beneficiary of the country’s macroeconomic recovery, reflecting a balance sheet and risk management framework that remained exceptionally resilient through earlier economic volatility. This underscores the Bank’s ability to sustain strong financial fundamentals through challenging periods and its favourable position within the domestic banking sector, the Bank added.( ComBank)
Sysco LABS Sri Lanka’s engineering teams have contributed to the development of the Sysco Agentic Ecosystem (SAGE), the enterprise AI platform for which Sysco Corporation was named runner-up in the Retail & Consumer Goods, Americas category at the 2026 Gartner Eye on Innovation Awards.
The recognition reflects Sysco’s continued pursuit of technological excellence through investment in AI and new approaches to business challenges. Sysco LABS plays a pivotal role in this work, bringing Sri Lankan engineering expertise to a collaborative effort across Sysco’s global technology organization.
Sysco is the world’s largest global foodservice distributor supplying restaurants, hotels, healthcare facilities and other businesses that prepare meals away from home. SAGE brings governed agentic AI into its operations across sales, supply chain and administrative functions. It connects AI agents, software that can perform tasks, with business data and systems, enabling them to recommend actions and carry out workflows within a common governance framework.
Commenting on the recognition, Thushera Kawdawatta, Managing Director, Sysco LABS Sri Lanka, and Vice President, GIC Strategy & Operations, Sysco, said, “Being recognized by Gartner validates the exceptional dedication and ingenuity of the team behind this milestone. As Sri Lanka continues to strengthen its role as Sysco’s global AI epicenter, it is our people who are driving this paradigm shift. Through seamless collaboration across our global technology ecosystem, we are deploying world-class talent to solve complex challenges at scale, proving that we are not just embracing the future of AI, but actively shaping it together.”
Searching for leadership: Can we bring back qualities of our golden years?
Wins for Dialog Axiata and Green Miracle Grand on Wednesday
Mendis and Udara steady ship with warm-up fifties
Prospect of ‘spaceport’ on Sri Lanka’s east coast
Batting frailties give Sri Lanka food for thought
A strong SL team leave for Under 19 Asia Cup
Political favour has weakened Police, and confidence will not return until enforcement of discipline without interference
Copyright © 2020 Upali Newspapers (Pvt) Ltd. Solution by LankaCom Privacy Policy
Loading comments…