Foreign investors are staging a notable comeback in Sri Lanka’s rupee-denominated Government securities market, signaling a gradual but meaningful restoration of confidence in the country’s macroeconomic trajectory.

Holdings of Treasury instruments by offshore investors have surged 109.3% year-on-year and 15.47% year-to-date, climbing past Rs. 160 billion to mark a near 30-month high. The decisive uptick reflects a reassessment of Sri Lanka’s risk-return profile by global funds at the start of 2026, as improving macroeconomic indicators and relatively attractive yields drew fresh allocations.

According to Wealth Trust Securities, foreign participation crossed the Rs. 160 billion threshold this week, coinciding with exceptionally high money market liquidity. Surplus liquidity in the banking system stood at Rs. 299 billion the highest level in over 11 years while Treasury bill rates declined for a fourth consecutive week. Secondary market bond yields also continued their downward trend, underscoring growing demand for government paper.

The renewed appetite appears driven by a combination of yield compression in developed markets and Sri Lanka’s stabilising macroeconomic outlook. Investors are gravitating particularly toward medium-duration Treasury bonds, where nominal yields remain elevated relative to regional peers. For global portfolio managers hunting carry opportunities, Sri Lanka’s government securities offer a compelling spread—provided policy discipline and exchange rate stability are sustained.

This rebound in foreign exposure, though impressive in percentage terms, still leaves holdings below pre-crisis peaks. That gap suggests additional headroom for inflows if reform momentum and macro stability continue.

The simultaneous rise in foreign holdings and system liquidity reflects deeper monetary dynamics. When offshore investors convert dollars to purchase rupee-denominated securities, the Central Bank of Sri Lanka typically absorbs the foreign exchange to bolster reserves. This process injects rupee liquidity into the domestic banking system, amplifying surplus conditions.

Liquidity has been further supported by multilateral inflows. A recent $206 million disbursement under the International Monetary Fund’s Rapid Financing Instrument has strengthened gross official reserves. While such inflows initially accumulate as foreign assets, their eventual conversion into rupees for fiscal spending adds to domestic liquidity once deployed.

The alignment of falling yields, abundant liquidity, and renewed foreign buying suggests that portfolio flows may be acting as an early barometer of confidence in Sri Lanka’s policy direction. Investors appear increasingly comfortable that inflation is moderating, fiscal reforms are progressing, and external buffers are being rebuilt.

However, sentiment remains conditional. Sustained inflows will depend on continued fiscal consolidation, reserve accumulation, and exchange rate stability. Any reversal in global risk appetite or domestic reform momentum could temper enthusiasm.

For now, the data points to a cautiously optimistic narrative: Sri Lanka’s government securities market is regaining credibility in the eyes of foreign investors, and portfolio flows are once again tilting in its favour.

Beyond CIF reductions and depreciation allowances, another practice within Sri Lanka’s vehicle market is drawing intensified scrutiny: VAT-free trade-ins structured to obscure transaction values.

The Ceylon Motor Traders’ Association warns that certain vehicle-for-vehicle or vehicle-for-asset exchanges particularly when tied to unregistered imports are being used to bypass standard Value Added Tax (VAT) mechanisms.

In theory, trade-ins are legitimate commercial arrangements. In practice, the CMTA alleges that some transactions are structured in ways that conceal the true consideration paid for imported vehicles. By masking the effective sale price, invoice values can be reduced lowering the base upon which import duties and VAT are calculated.

The implications are twofold. First, State revenue suffers. Import duties and VAT constitute major fiscal inflows, especially in a post-crisis economy seeking to rebuild external buffers and sustain fiscal surpluses. Second, market integrity weakens.

When vehicles enter the market with undervalued invoices, price benchmarks across digital platforms and dealership listings begin to reflect these suppressed figures. This can distort competition and disadvantage operators adhering strictly to legal and transparent pricing frameworks.

Compounding the problem is what industry sources describe as fragmented oversight. Valuation assessments may vary between import channels, and enforcement actions are perceived as inconsistent. Without structured, standardised verification processes, discrepancies can persist.

The CMTA argues that closing these gaps requires a multipronged approach: eliminating arbitrary depreciation allowances, introducing stricter monitoring of total funding mechanisms used for imports, and tightening oversight of VAT-free trade-in arrangements.

Consumer safety also enters the equation. The Association maintains that lawful, regulated channels ensure accountability, warranty support, and traceable documentation. When segments of the market operate outside consistent regulatory enforcement, both safety standards and after-sales commitments may weaken.

Notably, CMTA-member imports operate within auditable systems, generating documented foreign currency flows and predictable tax contributions. The Association says this model demonstrates that transparency and commercial viability are not mutually exclusive.

The broader question for policymakers is whether the current framework inadvertently incentivises regulatory arbitrage. If classification technicalities and loosely monitored trade-ins consistently reduce taxable value, the cumulative revenue impact could be substantial.

Recalibrating the system would demand political will and administrative capacity. Yet proponents argue that ensuring uniform standards across all market participants would restore confidence, protect compliant businesses, and secure tax revenue without constraining legitimate trade.

Sri Lanka’s tourism sector is celebrating record-breaking arrivals but behind the celebratory headlines lies a more complex revenue story. While the country welcomed its highest-ever number of visitors in 2025, earnings growth has remained modest, raising questions about value capture and structural challenges.

According to data from the Sri Lanka Tourism Development Authority (SLTDA), Sri Lanka attracted 2.36 million tourists in 2025, surpassing the previous peak of 2.33 million recorded in 2018. Yet tourism income rose by just 1.6% year-on-year to $3.2 billion, compared to $3.17 billion in 2024.

Tourism Minister Vijitha Herath insists the perceived revenue slowdown stems from a statistical revision rather than declining performance. In August 2025, authorities updated a long-standing spending estimate based on a 2018 survey, reducing the calculated average daily spend from $171 to $148.

“Tourism earnings haven’t reduced, but the method of calculation has changed,” Herath said, dismissing claims of a drastic drop as misleading.

However, the revised methodology exposes a deeper concern: Sri Lanka may be attracting more visitors without proportionately increasing their spending. India continues to dominate in total arrivals, but high-value, long-stay travellers largely originate from European markets segments that face economic headwinds and fluctuating travel trends.

Deputy Minister Ruwan Ranasinghe acknowledged the strategic pivot now underway. “We have achieved the volume as planned. Now the target is to go beyond that by improving products, targeting high-value segments, and increasing revenue,” he said.

The Government’s renewed focus includes expanding the lucrative MICE (Meetings, Incentives, Conferences, and Exhibitions) segment, promoting Indian wedding tourism, and strengthening luxury, wellness, wildlife and sports offerings. Notably, Colombo hotels reported 100% occupancy during the ongoing ICC Men’s T20 World Cup matches, with five-star room rates climbing from around $300 to nearly $500  a sign of growing pricing power.

Authorities are also preparing a Rs. 2 billion interim global PR and digital marketing campaign targeting 12 to 15 source markets, including India, the UK, Germany, China, Japan and Australia. A larger long-term strategy is being developed with consultancy support from the Asian Development Bank.

Still, the arithmetic underscores the challenge: lifting average daily spend from $148 to levels comparable with competing regional destinations will require sustained product upgrades, tighter regulation, and improved service standards.

As Sri Lanka seeks to surpass $4 billion in tourism earnings this year, the key question remains whether structural reforms can outpace statistical adjustments  and whether the island can truly transform volume-driven growth into high-yield prosperity.

Beyond trade ledgers and reserve statistics, the expansion of INR settlement carries a more immediate impact: how tourists spend and how much they leave behind.

India accounts for 23% of Sri Lanka’s tourist arrivals. Yet payment frictions often limit expenditure. According to Ajay Kumar of the Reserve Bank of India, enabling seamless INR payments could significantly lift tourism receipts.

Indian visitors can now scan QR codes and transact via India’s Unified Payments Interface (UPI) at selected Sri Lankan establishments, following its rollout in February 2024. Kumar argues the network must expand “massively,” claiming Indian tourists would “spend double” if allowed to transact freely in INR instead of converting to US dollars.

This behavioural shift matters. Tourism revenue is not solely about arrivals; it is about per-capita spending. If INR acceptance reduces psychological and transaction barriers, average daily spend could climb without increasing visitor numbers.

The integration goes beyond retail payments. Authorised Indian dealer banks may extend INR-denominated trade loans to Sri Lankan banks and individuals. Investors, particularly Indian public sector corporations, are also being encouraged to finance projects in INR rather than USD to avoid exchange losses when revenues are rupee-linked.

Governor Nandalal Weerasinghe of the Central Bank of Sri Lanka sees payments connectivity as central to the next growth phase. Sri Lanka’s economy grew about 4.5% in 2025, with projections of 4–5% this year. Inflation remains subdued, and external buffers have strengthened after debt restructuring.

Regional trade within South Asia remains around 5% of GDP far below ASEAN’s 22.5%. Currency interoperability could help close that gap, especially if banks operationalise SRVAs efficiently.

US President Donald Trump on Friday described the Supreme Court’s decision to strike down his sweeping global tariffs as “deeply disappointing,” while announcing plans to introduce a new 10 percent levy on imports.

In a 6–3 ruling, the Supreme Court of the United States held that Trump exceeded his authority by imposing broad tariffs under a law intended for use during national emergencies. The majority determined that such import taxes require approval from Congress.

The decision applies specifically to the so-called “Liberation Day” tariffs, which imposed wide-ranging duties on global imports. However, the ruling does not affect separate tariffs introduced by the administration targeting specific countries or individual products.

Chief Justice John Roberts authored the majority opinion, joined by five other justices, concluding that the administration had overstepped the statutory limits of executive authority.

In response to the judgment, Trump indicated that he would seek to reimpose tariffs, though he did not outline the legal mechanism he intends to use.

The ruling represents a significant setback for Trump’s trade policy, which has focused on aggressive tariff measures aimed at reshaping U.S. trade relations and reducing imports.

The White House has yet to provide further details on how the newly proposed 10 percent global levy would be implemented.

The National Botanic Gardens Department has announced that revenue generated from Sri Lanka’s botanical gardens exceeded Rs. 1 billion in 2025.

According to the Department, total income from botanical attractions reached Rs. 1.394 billion last year, marking a 7 percent increase compared to 2024.

Officials attributed the rise in revenue to the growth of the tourism sector and the increase in tourist arrivals to the country. The Department noted that despite the impact of Cyclone Ditwah in 2025, botanical gardens continued to perform strongly and recorded income surpassing Rs. 1 billion.

The Department stated that the contribution of botanical gardens to tourism earnings and overall economic activity in 2025 has been clearly demonstrated through this growth.

The National Botanic Gardens Department manages the Peradeniya Royal Botanical Gardens, Hakgala Botanical Gardens, Gampaha Botanical Gardens, Seethawaka Wet Zone Botanical Gardens, Mirijjawila Dry Zone Botanical Gardens and the Ganewatta Forest Herbal Garden.

It further revealed that the Peradeniya Royal Botanical Gardens alone attracted more than one million visitors last year, while total visitor numbers across all botanical gardens exceeded two million.

Energy Minister Kumara Jayakody told Parliament yesterday that the coal procurement process was conducted strictly in line with the 2023 tender procedure specifications, following recommendations outlined in the 2022/23 audit report. He denied allegations of any intentional irregularities in the process.

Ten bidders submitted proposals for the LCC/25/TT/1 term tender to supply 1.5 million metric tonnes of coal for the Norochcholai Lakvijaya Power Plant, covering the period from December 2025 to May 2026. The tender has drawn significant attention, marking one of the highest levels of participation in recent years, with 26 suppliers involved in the pre-qualification and registration phase.

The Minister noted that the supplier contracted for the 2024/2025 season failed to complete the required coal shipments within the expected timeframe, raising concerns over fuel availability. Although shipments were initially expected to be completed by April, they were finalized only by December last year.

He said the Lanka Coal Company (LCC) has since initiated a fresh procurement process through a long-term tender to supply 1.5 million ±10 percent metric tonnes of coal for the period from December 2025 to April 2026. The first shipment under the new tender arrived late last December.

Minister Jayakody emphasized that there has been no delay in the arrival of subsequent shipments. Nine vessels have already arrived in the country, the tenth is en route, and coal is currently being loaded onto the twelfth vessel.

He further stated that under the new shipments, no physical damage has been reported to the infrastructure of the Norochcholai Lakvijaya Power Plant.

Samagi Jana Balawegaya (SJB) MP Harsha de Silva has called for due recognition of the previous government’s economic achievements while commenting on Sri Lanka’s ongoing IMF-supported programme.

His remarks follow recent comments by IMF Managing Director Kristalina Georgieva, who commended the current Sri Lankan government for maintaining macroeconomic stability and continuing reform efforts under the IMF programme.

In a post on X, de Silva stated that while he supports the IMF programme and appreciates the present government’s commitment to stability—as well as Georgieva’s optimism regarding Sri Lanka’s prospects—several key economic gains were achieved under the previous administration.

He pointed out that inflation had declined from 70 percent to 2 percent, economic growth had rebounded from -7.3 percent to +5 percent, and that the country’s first-ever national governance diagnostic study had been requested and completed during the prior government’s tenure.

De Silva emphasised that these milestones should be acknowledged alongside the reforms currently being implemented by the present administration.