Economic News
View all(30)Govt. to Settle Rs. 23.87 Bn Outstanding Pharmaceutical Dues 💊
The Cabinet has approved the settlement of long-standing arrears for pharmaceutical supplies to stabilize the national healthcare supply chain. • Overall Settlement: The Government will pay Rs. 23.87 Bn in installments throughout 2026. This covers verified dues for the period from January 2018 to December 2023. • Beneficiaries: Payments are owed to the State Pharmaceutical Corporation (SPC), State Pharmaceutical Manufacturing Corporation, and various local manufacturers for drugs purchased and distributed via the Medical Supplies Division. • Verification Process: While the SPC reported total arrears of Rs. 32.92 Bn (dating back to 2008), a study by the Department of State Enterprises confirmed Rs. 23.87 Bn as the immediate payable amount for the 2018–2023 window. • Future Commitments: Outstanding dues for the period between 2008 and 2017 are currently being calculated, suggesting further financial outlays may be required once assessments are finalized. 📈 This move aims to provide liquidity to the pharmaceutical sector and ensure the uninterrupted supply of essential medicines within the public health system.
China Donates 11.48 Mn Metres of School Uniform Fabric to Sri Lanka 📈
The Chinese government has officially handed over a massive consignment of school uniform fabric to support the 2026 academic year, significantly easing the fiscal burden on the state and millions of families. • Overall Figures: A total grant of 11.484 million metres of fabric, valued at approximately LKR 5.6 Bn. The donation arrives in five shipments, with the first three already reaching the Colombo Port. • Beneficiary Impact: The program will benefit approximately 4,418,404 students nationwide. This includes children in all government and government-assisted schools, as well as student monks and lay students in government-approved Pirivenas. • Distribution Timeline: • Official Handover: Completed on January 13, 2026, by Prime Minister Harini Amarasuriya and Chinese Ambassador Qi Zhenhong. • Zonal Distribution: Scheduled to commence on January 19, 2026, to ensure students receive uniforms within the month. • Strategic Context: This donation marks the fourth consecutive year of China’s school uniform aid project (starting 2023), covering 100% of the national requirement for 2026. The move supports educational equity and provides vital social safety nets during the country's ongoing economic recovery. _Note: Distribution details based on provisional Ministry of Education schedules._
### 📈 World Bank: Global Resilience vs. Developing Economy Stagnation
The World Bank’s January 2026 Global Economic Prospects report reveals a resilient but deeply divided global economy. While advanced nations recover, 1 in 4 developing economies remains poorer than in 2019. • Global Growth Forecasts Global growth is projected at 2.6% in 2026 (upwardly revised) and 2.7% in 2027. Despite resilience, the 2020s are on track to be the weakest decade for growth since the 1960s. Global inflation is expected to ease to 2.6% by 2026. • Developing Economy Challenges Growth in developing nations is set to slow to 4.0% in 2026 from 4.2% in 2025. Per capita income in these regions remains only 12% of advanced economy levels. A massive "jobs challenge" looms with 1.2 billion young people entering the workforce this decade. • Regional & Sectoral Impact South Asia: Growth is projected to slow to 5.8%–6.2% in 2026 due to trade uncertainty and tech disruptions. Sri Lanka Context: Based on provisional data, Sri Lanka is expected to regain its 2018 real GDP levels by 2026, with growth stabilizing around 3.1%–3.5%. Focus sectors: Apparel & textiles and tourism-related services remain critical for recovery, though high food prices and debt servicing (103.9% debt-to-GDP in 2024) persist as risks. • Fiscal & Policy Priorities Restoring fiscal credibility is urgent; public debt in emerging markets is at a 50-year high. The report advocates for strict fiscal rules to improve budget balances by 1.4% of GDP over five years.
Proposal for a New Public Development Bank to Anchor Economic Recovery 📈
• The Current Crisis Sri Lanka faces a compounding economic crisis following Cyclone Ditwah, which caused US$ 4.1 Bn in asset damages. This adds to structural vulnerabilities from the 2022 debt crisis and ongoing IMF austerity measures. • The Development Finance Gap The absence of a dedicated public development bank has left SMEs and rural producers vulnerable. Current commercial lending focuses on short-term, high-interest loans, neglecting long-term projects in: Agribusiness and Manufacturing Infrastructure and ICT Industrial development in peripheral districts • Historical Context & Privatization Previously, the DFCC (est. 1955) and NDB (est. 1979) supported early industrialization in sectors like cement and tyres. However, both were commercialized or privatized by 2005 under neoliberal reforms, removing the state's mandate for concessional development finance. • Strategic Recommendations • Institutional Necessity: Establish a new public development bank to provide project-based financing rather than collateral-based loans. • Resilience: Use the bank as a counter-cyclical buffer against global trade tensions and climate shocks. • Diversification: Move away from "footloose" export dependency (e.g., apparel) toward strengthening domestic production and employment. • Global Context With over 500 development banks globally, countries like Ghana, Nigeria, and Vietnam are successfully using these institutions to bridge financing gaps and stabilize economies during shocks.
## 🇦🇺 Australia Migration: Stability Amidst Public Debate
• Policy Outlook: Despite rising anti-immigration headlines and housing pressures, Australia’s migration framework remains stable. Legal changes are slow-moving and structured, ensuring the system does not shift based on media sentiment or political rhetoric. • Economic Necessity: Migration is a long-term structural requirement. Industries such as health services (nurses/carers), construction (engineers), and the ICT/BPM sector (cyber security/AI) face chronic workforce shortages that the domestic population cannot fill. • Program Focus: The migration program is evolving rather than shrinking. Skilled migration remains the largest component of the permanent intake, with a continued emphasis on regional pathways and employer-sponsored visas to support national infrastructure. • Key Takeaways for Sri Lankans: • Eligibility is strictly based on points, skills, and qualifications, not public opinion. • Government planning levels remain substantial to counter an ageing population. • Focus on maximizing points and accurate skills assessments to remain a strong candidate. _Note: Based on expert analysis from certified migration consultants (January 2026)._
### 📈 CBSL Governor Calls for Revision of IMF Targets Post-Cyclone
Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe has highlighted the need to adjust the International Monetary Fund (IMF) targets under the Extended Fund Facility (EFF) due to the significant impact of Cyclone Ditwah. • Fiscal Adjustment & Recovery The 2026 budget, formulated prior to the disaster, must now accommodate unplanned reconstruction and relief spending. The World Bank estimates direct physical damage at US$ 4.1 Bn (approx. 4% of GDP), primarily affecting infrastructure and the agriculture sector. • Review Status & Emergency Funding The Fifth Review of the US$ 3 Bn EFF program—originally set for completion in late 2025—was deferred to allow for a full economic impact assessment. To bridge the gap, the IMF approved a US$ 206 Mn disbursement under the Rapid Financing Instrument (RFI), providing immediate liquidity without the delays of structural reviews. • Sectoral Impacts Agriculture: Devastated by the cyclone, posing risks to food security and rural livelihoods. Infrastructure: Extensive damage to roads, bridges, and power networks requiring massive capital expenditure. Apparel & Tea: Export logistics and production were temporarily disrupted by extreme weather. • Foreign Reserves Outlook Despite these shocks, the CBSL remains optimistic about external buffers, projecting official foreign reserves to reach approximately US$ 8 Bn by the end of 2026. _Note: Revisions to economic benchmarks will be discussed when the IMF mission team arrives later this month._
📈 Sri Lanka’s Digital Divide Deepens Despite Rising Literacy
The Department of Census and Statistics (2025 H1) reports a significant gap between basic mobile skills and the computer literacy required for formal employment, posing a hurdle for the national ICT/BPM and digital economy goals. • Overall Literacy & Access: • Digital literacy (mobile-based) reached 70.8%, but computer literacy lags at 38.4%. • Household computer ownership stagnates at 21.4%, remaining in the 20-21% range since 2023. • Internet usage is 60.4%, yet only 21.3% of the population uses e-mail, signaling a lack of advanced digital engagement. • Regional & Sector Disparities: • Urban computer literacy is 52.1%, significantly higher than Rural (36.6%) and Estate (18.6%) sectors. • Computer ownership in the Estate sector is just 5.8%. • The Western Province leads computer literacy at 49.8%, while the North Central Province is lowest at 23.5%. • Demographic & Occupational Trends: • Age: Computer literacy is highest among 15-19 year olds (75.6%) but drops sharply in older groups. • Education: Those with GCE A/L or higher show 78.6% literacy. • Employment: Literacy exceeds 90% in professional and clerical roles but falls to 34.2% in elementary occupations. The data suggests that while the digital economy is expanding, the lack of desktop/laptop access and advanced skills could reinforce existing socio-economic divides.
📈 Sri Lanka Social Security Board Achieves Record Progress in 2025
The Sri Lanka Social Security Board has reported its highest-ever progress in 2025, marking a significant milestone in its 30-year history of providing pension schemes for the unorganized sector. • Growth Performance: The value of new recruitments saw a dramatic surge, rising from Rs 167.41 million in 2024 to Rs 318.68 million in 2025 (provisional data indicates a 90.3% increase). • Digital Transformation: All management activities, including recruitments, returns payments, and administrative processes, are entering the final phase of digitalization. Full implementation is set for 2026 to ensure high efficiency and faster processing. • Strategic Impact: Under the Ministry of Rural Development, Social Security and Community Empowerment, these reforms aim to broaden the social safety net, providing critical financial security for workers outside formal employment structures. • Outlook: Minister Dr. Upali Pannilage highlighted that the board is now positioned to significantly accelerate the recruitment of new members starting in 2026.
📈 Sri Lanka Tourism: Over 67,000 Arrivals in First 8 Days of 2026
Sri Lanka’s tourism sector has started the year with strong momentum, recording 67,762 international arrivals between January 1 and January 8, 2026. This performance follows a record-breaking 2025, where the country welcomed 2.36 million visitors. • Overall Figures The Sri Lanka Tourism Development Authority (SLTDA) reported a peak daily arrival of 9,275 tourists on January 6. The government is currently targeting a minimum of 3.0 million arrivals for the full year 2026. • Top Source Markets India continues to lead as the primary source of visitors, followed by traditional European strongholds and Australia: • India: 11,367 (17.0% of total) • Russia: 8,425 • United Kingdom: 6,067 • Germany: 5,306 • Australia: 3,285 • Economic Context The steady influx of tourists is vital for foreign exchange liquidity. While 2025 saw record volume, the industry is focusing on increasing high-yield travel as the average daily spend per tourist was recently adjusted to US$ 148. A visa-free scheme for select countries is expected to roll out in Q1 2026 to further boost these numbers.
📈 Blueprint for Sri Lanka’s Transformative Growth (2025–2030)
A high-level policy roadmap titled "Sustaining Transformative Growth in Sri Lanka (2025–2030)" was launched in Colombo on January 8, 2026. Produced by ODI Global and CEPA, the report outlines a strategy to move beyond debt-stabilization toward a resilient and inclusive economy. • Economic Performance & Outlook GDP Growth: Recovered to 5% in 2024 and 4.8% in early 2025. Inflation: Sharp reduction achieved from 2022 peaks, though poverty remains "alarmingly high" (est. 24.5% in 2024). Foreign Reserves: Increased significantly to approx. US$ 6.8 Bn from crisis-era lows. • Key Sectoral Opportunities Tourism: Identified as a "quick win" through improved branding and regional development. Digital Economy: Focus on tapping high-growth potential and modernizing public administration. Niche Manufacturing: Integration into global supply chains to diversify the export base. Agriculture: Modernization to support food security and rural employment. • Strategic Priorities Labor Market: Addressing the critical shortage of STEM graduates and increasing female workforce participation. Factor Markets: Reforming land, capital, and labor productivity to attract FDI. Institutions: Strengthening the Central Bank’s independence and restructuring loss-making SOEs (e.g., SriLankan Airlines, CEB).
### Private Sector Borrowing Hits Record Rs. 262 Bn 📈
Sri Lanka's private sector credit surged to its highest monthly level in 2025 during November, just before the impact of Cyclone Ditwah. The banking sector remains the primary driver of this liquidity expansion. • Overall Credit Figures Private sector borrowings: Rs. 262.6 Bn in Nov (up from Rs. 246.1 Bn in Oct). Total private debt stock: Rs. 10 Trillion (up 26% YoY). Domestic bank credit: Rs. 9.43 Trillion (up 27.9% YoY). • Public Sector & Interest Rates Public corporation debt: Down 11.3% YoY to Rs. 584.8 Bn. Government credit: Rs. 8.11 Trillion (marginal 0.1% YoY increase). Policy rates: CBSL maintained the Overnight Policy Rate at 7.75% in late November. • Post-Disaster Relief & Outlook Cyclone Ditwah impact: CBSL expects a brief inflation spike to ~3%, though IMF projections suggest it could exceed the 5% target. Debt relief: Banks directed to offer 3–6 month repayment holidays and waive penal fees for affected borrowers. Recovery loans: A 3% interest concessionary scheme is being rolled out for MSMEs, with mandatory registration to formalize small businesses and the informal sector. • Strategic Focus The government is prioritizing the rapid disbursement of credit to ensure stability in the agriculture and manufacturing sectors following widespread disruptions.
Sri Lanka Tourism Starts 2026 with 33,000+ Arrivals 📈
Sri Lanka’s tourism sector shows steady momentum in the first four days of 2026, marking an optimistic start toward ambitious annual targets. • Overall Performance: The country welcomed 33,076 tourists from January 1–4, a 3% YoY increase compared to 25,620 arrivals in the same period of 2025. The average daily arrivals rose to 8,269. • Top Source Markets: India remains the leading contributor, accounting for 15% of total arrivals. 1. India: 5,065 2. Russia: 3,948 (12%) 3. UK: 2,914 (9%) 4. Germany: 2,862 (9%) 5. Australia: 1,790 (5%) Other notable contributors include Poland, the US, Italy, China, and France. • Strategic Targets: For 2026, Sri Lanka Tourism aims for 3 million arrivals and US$ 5.0 Bn in revenue. This follows a record-breaking 2025, which saw 2.36 million arrivals and over US$ 3.2 Bn in earnings. • Economic Context: While footfall is increasing, industry experts emphasize a shift toward value generation over volume to maximize the sector's impact on national economic growth and foreign exchange liquidity.