Sri Lanka’s capital market trajectory in 2026 will be shaped not only but by a broader repositioning of the economy within the regional investment landscape. As macroeconomic stability strengthens and debt vulnerabilities ease, capital markets are increasingly viewed as a strategic tool to bridge the country’s investment gap and sustain long-term growth.

Fiscal consolidation has been central to this shift. Government revenue has recovered to above 15% of GDP, a critical threshold under Sri Lanka’s restructured debt framework. This improvement has enabled the country to meet governance-linked benchmarks while delivering three consecutive years of primary budget surpluses by 2025—an outcome few anticipated during the depths of the crisis.

Debt sustainability metrics have also improved materially. External debt servicing obligations for 2026 and 2027 are projected to remain below $2.5 billion annually, a sharp reduction from pre-restructuring levels. This easing of repayment pressure has translated into a healthier interest expense-to-tax revenue ratio, a key indicator closely monitored by international credit rating agencies as Sri Lanka emerges from default.

However, the growth challenge remains. Sri Lanka’s investment-to-GDP ratio currently stands at around 27%, comprising private investment of approximately 23%, foreign direct investment near 1%, and public investment of about 3%. Historical data suggests that sustained growth above 6% requires investment levels closer to 30–31% of GDP. Bridging this gap will require mobilising long-term capital beyond traditional bank lending.

This is where capital markets and IPOs in particular become strategically important. Equity markets provide risk capital that supports expansion without exacerbating leverage. As domestic credit conditions improve, private sector credit growth has exceeded Rs. 200 billion per month since mid-2025, while Government borrowing from local markets has declined. Importantly, private sector credit-to-GDP has risen to around 31.3% without signs of excessive leverage, indicating room for complementary equity financing.

Regulatory discipline will remain critical. The enforcement of the Public Finance Management Act and Debt Management Act has strengthened investor confidence by institutionalising fiscal restraint. Maintaining this discipline while encouraging private capital formation will be essential to sustaining recovery momentum.

In this context, a vibrant IPO pipeline in 2026 is not merely a market development—it is an economic necessity. A deeper, more liquid capital market can channel savings into productive investment, attract foreign portfolio flows, and reduce systemic dependence on bank credit. If current reforms remain on track, 2026 could mark the year Sri Lanka transitions from crisis recovery to capital market-led growth.

Prime Minister Dr. Harini Amarasuriya told Parliament yesterday (6) that the State of Public Emergency has been extended by a further month solely to facilitate urgent interventions needed to restore the country following the widespread devastation caused by Cyclone Ditwah.

Participating in the parliamentary debate on extending the emergency regulations, the Prime Minister stressed that the Government will under no circumstances use emergency powers to suppress the media or any section of society.

She said Cyclone Ditwah had caused unprecedented damage to national infrastructure, particularly roads and bridges, while a large number of schools require rebuilding or relocation. The country has also experienced landslides on an unprecedented scale, with the National Building Research Organisation (NBRO) reporting around 1,300 landslides so far.

Dr. Amarasuriya noted that the scale of damage and increased risks posed by landslides have placed an extraordinary burden on the State, requiring rapid mobilisation of human resources and materials to carry out recovery and mitigation work across affected regions.

“The need to extend the state of emergency arises only from this situation and not due to any other reasons,” the Prime Minister said, adding that the emergency regulations are being used mainly to maintain essential services and to appoint the Commissioner General of Essential Services.

She emphasized that the Government’s sole objective is to efficiently and swiftly restore affected areas and help communities return to normalcy, and that the extension of the State of Public Emergency was presented to Parliament strictly for that purpose.

Indian External Affairs Minister Dr. Subrahmanyam Jaishankar has held discussions with Janatha Vimukthi Peramuna (JVP) General Secretary Tilvin Silva during a meeting with a JVP delegation currently visiting New Delhi.

Describing the engagement as warm and constructive, Dr. Jaishankar said the talks focused on further strengthening the long-standing ties between India and Sri Lanka, while also exploring avenues for cooperation, including in the area of social welfare.

During the discussions, India reiterated its continued support for Sri Lanka, recalling New Delhi’s assistance during the country’s recent economic crisis as well as support extended following the devastation caused by Cyclone Ditwah.

Dr. Jaishankar emphasized that India will remain a true and trusted partner to Sri Lanka, consistent with its neighbourhood-first policy and broader regional vision.

The meeting highlights ongoing political and social engagement between the two countries, as both sides continue efforts to deepen bilateral cooperation. The JVP delegation is in New Delhi on an official invitation from the Indian government.

The Ministry of Education, Higher Education, and Vocational Education has called for applications from graduates to fill teaching vacancies in Sinhala, Tamil, and English medium schools across the island.

According to Extraordinary Gazette Notification No. 2474/18 dated February 2, 2026, graduates currently serving in the public service as of February 10, 2023, who are not more than 45 years of age and have completed their degree qualifications, are eligible to apply.

Meanwhile, Extraordinary Gazette Notification No. 2474/19, also issued on February 2, 2026, specifies eligibility for several other categories. These include graduates not engaged in public service who were under 40 years of age as of February 10, 2023, and have completed their degree qualifications. It also applies to officers under 40 years of age as of that date who were appointed to the public service after February 10, 2023, and are currently serving, as well as those who were engaged in public service on that date but later resigned with formal approval. In addition, officers under 40 years of age who are currently in public service and obtained their degree qualification after February 10, 2023, are also eligible.

The Ministry emphasized that applicants who previously applied under Gazette Notification No. 2317 published on January 27, 2023, are not required to reapply if they are already engaged in public service. However, those who wish to update details such as their telephone number, National Identity Card number, or mailing address may submit requests to the Department of Examinations and download an amended application form.

For further information, the Ministry has provided the following contact numbers during working days from 9.00 a.m. to 4.00 p.m.: Sinhala – 0112 784819, 0112 785634, Hotline 1988; Tamil – 0112 785634; English – 0112 785258, 0112 784819, 0112 787399.

President Anura Kumara Dissanayake stressed that the extension of the emergency law is intended solely to accelerate post-Cyclone Ditwah reconstruction efforts and will not be used as a means of repression.

The President made these remarks at the Niyangoda School playground during an event held under the ‘Rebuilding Sri Lanka’ programme, which aims to provide land and financial assistance for the reconstruction of houses and the resettlement of families severely affected by the cyclone.

Addressing the gathering, President Dissanayake said Cyclone Ditwah had caused extensive damage to both livelihoods and the national economy, noting that ordinary laws were insufficient to manage rebuilding efforts following a disaster of such magnitude. He said special legal provisions were therefore required to ensure an efficient and timely reconstruction process.

He explained that the Constitution allows for the enactment of special laws, while the Public Security Ordinance provides the legal framework to introduce them when necessary. “In situations like this, laws with special administrative powers are essential. That is why the emergency law was invoked,” he said.

President Dissanayake further assured that, unlike in the past when emergency regulations were often used to suppress trade unions or restrict media freedom, the current administration would not use the law for such purposes. He emphasized that the emergency provisions would remain in force only until critical reconstruction activities are completed.

He reiterated that the emergency law would not be used as a tool of oppression, stating that its extension is aimed at expediting procurement processes, land allocation, and rebuilding work, while also providing necessary legal protection for public officials involved in the recovery process. The President added that areas most severely affected by Cyclone Ditwah would be given the legal safeguards required to ensure rapid and effective reconstruction.

Laugfs Gas has announced revised domestic LPG refill prices for February 2026, effective from midnight yesterday (06).

Under the new pricing structure, a 12.5kg domestic gas cylinder will be priced at Rs. 4,330, while a 5kg domestic cylinder will cost Rs. 1,742.

Showers will occur at times in Uva province and in Matale, Nuwara-Eliya, Ampara and Batticaloa districts.

Several spells of showers will occur at Northern, North-central and North-western provinces and in Hambantota district.

Showers or thundershowers may occur at several places elsewhere after 2.00 p.m. Fairly heavy showers above 50 mm are likely at some places.

Fairly strong winds about (30-40) kmph can be expected at times over Eastern slopes of the central hills, Northern, North-central and North-western provinces and in Matale, Trincomalee and Hambantota districts.

Misty conditions can be expected at some places in Western, Sabaragamuwa and Central provinces and in Galle, Matara and Badulla districts during the early hours of the morning.

The general public is kindly requested to take adequate precautions to minimize damages caused by temporary localized strong winds and lightning during thundershowers.

Sri Lanka’s tea industry entered 2026 on visibly shaky ground, despite official assurances of recovery and growth. Market data from Forbes & Walker Research shows that tea prices have softened across all elevations, raising questions about whether government optimism aligns with ground realities faced by growers, factories, and exporters.

The National Sales Average (NSA) in January 2026 declined both month-on-month and year-on-year, settling at Rs. 1,164.54 per kilogram. This marked a notable drop from December 2025 and undershot January 2025 levels as well. More importantly, when measured in dollar terms, all elevations recorded negative year-on-year variances, reflecting pressure from global market conditions and currency dynamics.

High Grown teas averaged Rs. 1,143.12, recording a monthly decline though posting a modest rupee gain over last year. Medium Grown teas showed the steepest deterioration, falling sharply from December and registering declines on both rupee and dollar comparisons year-on-year. Low Grown teas, traditionally a strong performer, also recorded consistent declines across both metrics.

These price movements come against the backdrop of supply disruptions caused by cyclone Ditwah, which halted production for nearly a week in December 2025 and resulted in losses of over one million kilograms. Despite this, Sri Lanka Tea Board Chairperson Rajpal Obeyesekere maintains that the industry is on track to achieve between 290 and 300 million kilograms of production in 2026, provided weather patterns remain favourable and fertiliser subsidies continue.

Production figures show that Sri Lanka produced 264.12 million kilograms of tea in 2025, a modest increase from 2024 and a stronger rebound compared to 2023. However, the Department of Census and Statistics reported an 8.1% contraction in tea production volumes in the third quarter of 2025, citing rising input costs, labour shortages, and delayed replanting efforts structural challenges that predate cyclone impacts.

Export performance has offered some relief. Tea exports in 2025 rose by 11.65 million kilograms, while export earnings climbed 4.8% to $1.506 billion. The average Free On Board price remained largely unchanged, signalling that volume gains, rather than price improvements, drove revenue growth.

Authorities and industry bodies remain focused on long-term interventions such as replanting and mechanisation. While these initiatives are underway, their benefits will take years to materialise. Meanwhile, less than 7% of factories have adopted mechanisation, leaving labour shortages unresolved.

As prices soften and dollar earnings remain under strain, the contrast between market indicators and policy optimism suggests the sector’s recovery may be more fragile than official narratives imply.