COLOMBO, Sri Lanka – 04 September 2026 – Sri Lanka’s economic landscape continues to present a mixed picture, with notable shifts in inflation, trade, and financial markets, according to the latest “Weekly Economic Indicators” released by the Central Bank of Sri Lanka (CBSL) for the week ending 04 September 2026.
The report highlights an uptick in headline inflation, a widening merchandise trade deficit, and rising crude oil prices due to geopolitical tensions, while the stock market showed gains and lending rates experienced a marginal decrease.
Real Sector: Inflationary Pressures Persist
Inflation emerged as a significant concern, with the Colombo Consumer Price Index (CCPI, 2021=100) based headline inflation climbing to 8.0 per cent in August 2026, a notable increase from 7.3 per cent in July 2026. Both Food and Non-food inflation contributed to this rise, recording 8.5 per cent and 7.7 per cent, respectively. The CCPI-based core inflation also saw an increase, reaching 5.1 per cent in August 2026, up from 4.4 per cent the previous month.
On a positive note, the Purchasing Managers’ Index (PMI) for the Construction Industry, as reflected by the Total Activity Index, expanded on a month-on-month basis in July 2026, indicating some resurgence in construction activities.
Globally, crude oil prices experienced an increase during 31 August to 04 September 2026. Renewed US-Iran hostilities fuelled concerns over potential disruptions to global oil supplies, leading to Brent crude oil prices rising by US dollars 6.69 per barrel and WTI crude oil prices by US dollars 8.79 per barrel compared to the preceding week. This international volatility could exert further pressure on Sri Lanka’s import bill.
Monetary Sector: Easing Lending Rates, Surging Liquidity
In the monetary sphere, the Average Weighted Prime Lending Rate (AWPR) for the week ending 04 September 2026 saw a marginal decrease of 03 basis points, settling at 10.92 per cent. However, the Average Weighted Call Money Rate (AWCMR) edged up slightly to 8.86 per cent on 04 September 2026 from 8.84 per cent a week earlier.
The country’s reserve money increased during the week, primarily driven by an rise in currency in circulation and an increase in commercial bank deposits with the Central Bank. Market liquidity remained robust, with the total outstanding market liquidity registering a significant surplus of Rs. 355.30 billion by 04 September 2026, up from Rs. 318.13 billion at the end of the previous week.
Sri Lanka’s stock market demonstrated positive momentum, with the All-Share Price Index (ASPI) increasing by 1.43 per cent to 21,620.44 points, and the S&P SL 20 Index rising by 0.89 per cent to 6,058.92 points by 04 September 2026, compared to the previous week’s closing values.
Fiscal Sector: Stable Debt, Oversubscribed Treasury Bills
The fiscal update indicates that outstanding central government debt stood at Rs. 30,533.60 billion at the end of April 2026. This comprised Rs. 18,853.43 billion in total outstanding domestic debt and Rs. 11,680.17 billion in rupee value of total outstanding foreign debt.
In the primary market for government securities, Treasury Bill yields were broadly stable during the week, with a marginal decrease observed only in the 182-day Treasury Bill yields. Both Treasury Bill and Treasury Bond yields also marginally decreased in the secondary market. The auction for Treasury Bills experienced an impressive oversubscription rate of approximately 2.5 times, reflecting healthy investor appetite. The rupee value of Treasury Bills and Treasury Bonds held by foreign investors remained broadly stable compared to the previous week, indicating continued confidence.
Furthermore, the total volume of secondary market transactions in Treasury Bills and Treasury Bonds surged by approximately 51.1 per cent in the reporting week, signalling increased market activity.
External Sector: Widening Deficit and Rupee Depreciation
The external sector presented some challenges. The Sri Lanka Rupee experienced a year-to-date depreciation of 5.6 per cent against the US dollar as of 04 September 2026.
Tourist arrivals recorded 191,704 in August 2026, a slight decrease compared to 196,845 in July 2026 and 198,235 in August 2025. This indicates a minor dip in the recovery trajectory for the crucial tourism sector.
The merchandise trade deficit widened significantly to US dollars 6,507 million during the seven months ending in July 2026, compared to US dollars 3,850 million recorded in the corresponding period of 2025. This widening deficit was primarily driven by a substantial 25.8 per cent year-on-year increase in import expenditure to US dollars 14,643 million, which outpaced the 4.4 per cent year-on-year rise in export earnings to US dollars 8,137 million during the same period. Consequently, the terms of trade deteriorated by 2.4 per cent year-on-year to 86.8 index points in July 2026, as import price increases surpassed export price gains.
Gross official reserves were provisionally estimated at US dollars 6,600 million as at end July 2026, which includes proceeds from the People’s Bank of China (PBOC) swap arrangement. The CBSL’s net absorption from the domestic foreign exchange market amounted to US dollars 579 million in August 2026.
The latest CBSL Weekly Economic Indicators underscore the ongoing complexities in Sri Lanka’s economic recovery. While some sectors show resilience and positive trends, inflationary pressures and external sector imbalances remain key areas requiring careful monitoring and policy interventions.
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