The Sri Lanka Navy has rescued 35 individuals from an Iranian vessel that encountered distress in the southern seas off Sri Lanka.

According to the Ministry of Defence, arrangements have been made to transport the rescued individuals to the Karapitiya Teaching Hospital in Galle for medical attention.

The Sri Lanka Air Force has also deployed an aircraft to the area to support ongoing search operations.

Speaking in Parliament today (04), Minister of Foreign Affairs Vijitha Herath stated that the incident occurred outside Sri Lanka’s territorial waters. He confirmed that the Navy launched immediate rescue operations after receiving a distress call indicating that the vessel was sinking.

Earlier reports indicated that at least 30 people had been rescued from the vessel, which is believed to belong to the Iranian Navy.

The distress call was received from a location approximately 40 nautical miles off Galle Harbour, prompting the Sri Lanka Navy to dispatch vessels to the site to carry out rescue operations.

Deputy Minister of Defence Major General (Retd) Aruna Jayasekara said that necessary measures are already being taken in response to the incident.

Market confidence in Sri Lanka’s financial system remains intact over the next 12 months but beneath that surface stability, medium-term anxieties are rising, according to the latest Systemic Risk Survey released by the Central Bank of Sri Lanka (CBSL).

The biannual survey, conducted between 19 December 2025 and 16 January 2026 among 147 financial sector firms, reveals a cautiously optimistic short-term outlook.

 However, confidence over a three-year horizon has weakened, reflecting deeper concerns about geopolitical instability, natural disasters, and structural vulnerabilities.

 Importantly, the survey was completed before two major global shocks: a US Supreme Court ruling on tariff policy linked to the Trump administration and subsequent military strikes by the US and Israel on Iran.

Those developments triggered oil price spikes and temporary shutdowns of major airline hubs in the Gulf region  events likely to amplify the very risks respondents had already flagged. While short-term sentiment remains positive, respondents reported a higher perceived probability of a “high-impact negative event” in both the one-year and three-year outlooks.

That dual signal — optimism combined with elevated tail-risk fears suggests markets believe the system can withstand near-term stress but are less confident about prolonged turbulence.

 The survey framework is expansive, covering seven broad risk categories and 46 sub-risks. These include global macroeconomic risks, fiscal and sovereign risks, domestic macroeconomic conditions, financial market volatility, institutional stability, financial infrastructure resilience, and broader systemic threats.

 Notably, the Central Bank refined its methodology in late 2025 by separating “domestic macroeconomic risks” into two new categories: fiscal and sovereign-related risks, and general domestic macroeconomic risks.

Three new sub-risks were added, reflecting the evolving complexity of Sri Lanka’s post-crisis environment.

 The dispersion of responses across categories indicates no single dominant threat. Instead, risk perceptions are fragmented spanning external shocks, fiscal pressures, and operational vulnerabilities.

 Such dispersion can be interpreted two ways: either systemic risk is diversified and manageable, or uncertainty is too diffuse to isolate. Participants included risk officers from licensed banks, finance companies, insurance firms, unit trust managers, brokerage houses, rating agencies, microfinance institutions, and mobile money providers  a cross-section of the financial architecture. The CBSL emphasised that the findings reflect market perceptions rather than official views.

Still, perception often drives behaviour. If institutions anticipate higher tail risks, they may tighten lending standards, increase liquidity buffers, or delay expansion plans potentially slowing economic momentum.

The contrast between resilient short-term sentiment and weakening medium-term confidence may reflect a belief that immediate post-crisis stabilisation has worked, but structural and geopolitical uncertainties remain unresolved.

In essence, the survey captures a system no longer in emergency mode however not entirely out of the woods. Confidence has stabilised. Conviction has not.

Sri Lanka’s external debt stock is inching upward again raising fresh questions about whether the National People’s Power (NPP) Government can hold the line on International Monetary Fund (IMF) benchmarks while navigating the final stretch of its historic restructuring.

According to the Treasury’s Quarterly Debt Bulletin for December 2025, outstanding Government external debt rose to $ 37.66 billion by 31 December, up $ 425 million from $ 37.24 billion at end-September. Though modest in quarterly terms, the uptick comes at a sensitive moment when fiscal consolidation and debt sustainability targets remain under close IMF scrutiny.

Total gross public debt stood at $ 103.6 billion at year-end, down from $ 106.8 billion in September  reflecting restructuring adjustments and currency effects. Of this, central Government debt accounted for $ 100.3 billion, while guaranteed State-Owned Enterprise (SOE) debt fell to $ 3.48 billion from $ 4.4 billion. Provincial and local government debt remained marginal at $ 21 million.

In composition, multilateral lenders now account for 38% of Government external debt ($ 14.3 billion), commercial borrowings 34% ($ 12.7 billion), and bilateral creditors 28% ($ 10.7 billion). International Sovereign Bonds (ISBs) alone represent $ 10.25 billion of the commercial segment.

Roughly 75% of the external portfolio carries fixed interest rates, limiting exposure to global rate volatility. However, 23% remains floating a risk factor if global financial conditions tighten again.

Sri Lanka’s domestic debt stands significantly higher at $ 62.7 billion, bringing the Government’s total debt stock close to $ 102 billion. In rupee terms, gross public debt reached Rs. 32.2 trillion at end-2025, including Rs. 3.1 trillion in Treasury Bills and Rs. 15.6 trillion in Treasury Bonds.

The central issue is whether incremental external borrowing, even within a restructured framework, aligns with IMF debt sustainability thresholds. Under the Extended Fund Facility program agreed in 2023, Sri Lanka committed to strict primary surplus targets and debt-to-GDP reduction benchmarks through the medium term.

Progress on restructuring has been substantial. Following the April 2022 debt service suspension, agreements were finalised in 2024 with the Official Creditor Committee and key bilateral lenders, including China Exim Bank and China Development Bank. A landmark bond exchange concluded in December 2024 saw approximately 98% participation by ISB holders, converting nearly all defaulted bonds into new instruments.

By late 2025, bilateral agreements with Paris Club members and other lenders brought the signing process to roughly 95% completion. Debt servicing to restructured creditors has resumed under revised schedules.

However stabilisation does not equal resolution. External debt has been reshaped, maturities extended, and cash-flow pressures eased but the nominal stock remains high. For the NPP administration, the challenge is twofold: sustaining fiscal discipline while avoiding policy reversals that could unsettle markets or delay IMF reviews.

With global financing conditions uncertain and growth still fragile, the margin for deviation is slim. A $ 425 million quarterly rise may be manageable but sustained slippage could complicate future program assessments and investor confidence.

The restructuring phase may be nearing completion. The compliance phase is only beginning

As at 3 March, the Securities and Exchange Commission of Sri Lanka finds itself at the centre of an unusually public reckoning over the breadth of its enforcement authority under the new SEC Act, with senior jurists warning that credibility in capital markets cannot come at the expense of constitutional guarantees.

The debate unfolded at the Bar Association of Sri Lanka (BASL) National Capital Market Symposium on 26 February at Cinnamon Life at City of Dreams, where two expert panels dissected insider dealing, market manipulation, and the regulator’s expanded investigative reach.

Former SEC Director (Legal and Enforcement) Ayanthi Abeyawickrama defended visible, firm enforcement as essential to investor confidence. “The regulator’s duty is to preserve confidence and ensure orderly markets,” she said, framing deterrence as a systemic necessity in a market still rebuilding depth and participation.

But Heritage Partners Senior Partner Dr. Arittha Wikramanayake delivered a pointed counter: “Presumption of innocence is not optional.” His concern centred on statutory presumptions within the new law that may, in practice, shift the evidential burden onto accused parties  a significant departure from traditional criminal law safeguards.

One flashpoint was the publication of names at the show-cause stage. Under current practice, entities under investigation may face public disclosure before final adjudication. Wikramanayake argued that such publicity can inflict immediate commercial and reputational harm during investigations that often span years. “Publication at the show-cause stage can function as punishment before adjudication,” he warned.

Harsha Amarasekera, PC, analysing insider dealing provisions, noted that liability now turns on possession of unpublished price-sensitive information rather than fiduciary status. “The perimeter is clearly broader,” he observed, underscoring that expanded exposure requires disciplined application of presumptions and investigative tools.

Former Supreme Court Justice Buwaneka Aluwihare, PC, reinforced that statutory presumptions “cannot displace fundamental criminal law principles,” signalling judicial unease over the balance between efficiency and fairness.

Panellists also scrutinised institutional design. Investigations are conducted under the Commission’s authority, findings evaluated internally, and enforcement determinations made by the same body. “We cannot allow a system where the same institution effectively investigates, determines, and enforces without robust procedural safeguards,” Wikramanayake cautioned.

Concerns extend beyond doctrine to capacity. Reported vacancies at the Commission estimated at around 50 positions raise questions about whether the regulator possesses sufficient technological expertise and commercial depth to apply sophisticated insider trading and manipulation provisions consistently.

The debate sharpened around the Act’s compounding powers, which allow administrative settlement of offences through financial penalties linked to benefit gained or loss avoided. While efficient in theory, significant monetary consequences may create strong inducements to settle. Where penalties are substantial, Wikramanayake warned, proportionality and procedural clarity become paramount.

Speakers were careful to distinguish between statute and stewardship. “I do not fault the statute,” Wikramanayake concluded. “The Act provides the tools. The question is whether the institution has the capacity to apply them in complex commercial environments.”

As enforcement activity intensifies, the central tension remains clear: market confidence depends on firmness but its durability may ultimately rest on fairness.

President Anura Kumara Dissanayake has extended an official invitation to Pope Leo XIV to undertake a state visit to Sri Lanka.

The letter of invitation was handed over at the Vatican by Minister Bimal Rathnayake, who is currently on an official visit to Italy. The letter was presented during a meeting with the Under-Secretary for Relations with States, Monsignor Mihaita Blaj.

Further details regarding the proposed visit have not yet been announced.

The ongoing conflict in the Middle East has disrupted international parcel shipments from Sri Lanka, Postmaster General Ruwan Sathkumara said.

He noted that the high number of cancelled flights to Middle Eastern destinations has directly impacted international postal services, resulting in delays and difficulties in dispatching goods to certain countries.

According to Sathkumara, several consignments collected last Friday have not yet been dispatched due to flight cancellations and operational restrictions in the region.

He said authorities have informed the public about the disruptions and are maintaining close coordination with postal administrations in affected countries.

While expressing hope that services would return to normal once conditions stabilise, the Postmaster General cautioned that perishable and time-sensitive items may be at risk if delays continue.

He added that the disruptions are affecting not only Sri Lanka but also recipient countries.

Police have arrested a suspect for allegedly storing a large quantity of diesel illegally at a livestock farm in the Gomarangalla area, within the Galenbindunuwewa Police Division.

According to the Police Media Division, officers carried out a raid on March 3 following a tip-off regarding the unlawful storage of fuel.

During the operation, police discovered 10 barrels containing approximately 1,900 litres of diesel that had been stockpiled at the farm.

A 49-year-old resident of Gomarangalla was taken into custody in connection with the incident.

Police stated that the suspect is scheduled to be produced before the Kahatagastigiliya Magistrate’s Court on March 4.

Further investigations are being conducted by the Galenbindunuwewa Police.

Sri Lanka could face a Balance of Payments (BoP) crisis if the ongoing Middle East conflict continues for an extended period, economist Talal Rafi has warned.

Speaking to Ada Derana, Rafi said global oil prices are likely to keep rising amid the conflict, particularly as oil refineries in the region have reportedly come under attack in recent days, potentially affecting production.

He noted that higher oil prices could be accompanied by increases in global food prices, contributing to a surge in global inflation.

According to Rafi, Sri Lanka spends approximately US$ 4.5 billion annually on fuel imports. A 10 percent increase in oil prices would therefore place significant pressure on the Government’s current account, he said.

He cautioned that if global oil prices reach the US$ 100 per barrel mark, Sri Lanka could face serious external sector stress, potentially leading to a Balance of Payments crisis.

Rafi further pointed out that the conflict could negatively impact Sri Lanka’s foreign remittances and tourism earnings, both key sources of foreign exchange for the country.

While the ongoing hostilities are already having an economic impact, a prolonged conflict could have severe consequences for Sri Lanka’s economy, he added.

President Anura Kumara Dissanayake has urged all parties involved in the ongoing Middle East conflict to commit to a swift and peaceful resolution, warning of its potential repercussions on the global economy, including Sri Lanka.

Addressing Parliament yesterday (03), the President said military conflicts do not create favourable conditions for any group and highlighted the destructive capacity of modern military technologies.

“Our position as Sri Lanka is that all parties involved in this war must, as soon as possible, make the necessary commitments and take steps toward a peaceful world,” he said.

The President noted that Sri Lanka cannot isolate itself from the consequences of the conflict, adding that the lives of Sri Lankans could be significantly affected. He said a national programme is being prepared to address emerging challenges, while stressing that lasting solutions require international commitment to peace.

He warned that the conflict could disrupt global oil and gas supplies and create difficulties for Sri Lankans living in the Middle East. The tourism industry, foreign remittances, shipping and aviation sectors could also be impacted, he said.

Acknowledging public concern, President Dissanayake said societal stability requires practical assurances, not just statements. He added that while the Government has managed multiple crises since taking office, the Middle East conflict presents unique uncertainties.

The President said the Government is closely monitoring developments. The Central Bank of Sri Lanka has conducted a review and is expected to submit a report on the potential economic impact shortly. The Ministry of Finance is also preparing an assessment on the impact on public life, alongside a programme to ensure the continuity of essential services for citizens both locally and overseas.

“The primary responsibility for finding a path out of the crisis rests with the government. However, Parliament and the people also have a role to play. We must face this challenge together with a common objective and plan,” he said.

Addressing concerns over fuel supplies, the President detailed the country’s current reserves and storage capacity.

He said Sri Lanka’s storage facilities at Kolonnawa and Muthurajawela have a combined capacity of approximately 150,000 metric tons, excluding the IOC tanks in Trincomalee. Diesel reserves are sufficient for 33 days, while petrol stocks are adequate for 27 days. A shipment of 35,000 metric tons of petrol expected on March 7 or 8 will extend reserves to around 40 days.

Aviation fuel stocks are sufficient for 49 days, with daily refining covering a significant portion of demand. Several fuel shipments are scheduled throughout March, including vessels from RM Parks, Sinopec, the Indian Oil Corporation (IOC) and the Ceylon Petroleum Corporation (CPC).

Crude oil stocks are currently sufficient for 26 days, with an additional shipment expected to extend refinery operations to a total of 44 days.

“Because of this, there is no crisis regarding oil,” the President assured Parliament.