SenFin Research – News Updates – 3 August 2026

*Cash demand lifts reserve money to Rs. 1.89 t as currency in circulation rises*

Currency in circulation and reserve money increased during the first half of 2026, reflecting seasonal demand for cash and prevailing monetary conditions, while the Central Bank of Sri Lanka (CBSL) said changes in currency holdings also reflected public preference for cash amid movements in interest rates. 

*Source: (Daily FT)*https://www.ft.lk/front-page/Cash-demand-lifts-reserve-money-to-Rs-1-89-t-as-currency-in-circulation-rises/44-795478

*Construction PMI increases in June*

The Sri Lanka Purchasing Managers’ Index for Construction (PMI–Construction), as reflected in the Total Activity Index, increased to 60 in June 2026 from 59.1 in May, indicating an expansion in construction activities.

*Source: (Daily FT)*https://www.ft.lk/front-page/Construction-PMI-increases-in-June/44-795474

*Govt. warns AI reshaping digital export model*

The Government has warned that artificial intelligence (AI) is changing the economics of software exports, arguing that Sri Lanka must move beyond selling engineering hours towards products, intellectual property, and higher-value digital services if it is to achieve its target of generating $ 5 billion in digital exports by 2030.

*Source: (Daily FT)*https://www.ft.lk/front-page/Govt-warns-AI-reshaping-digital-export-model/44-795476

 

*External sector deteriorates in 1H, trade deficit widens 67% YoY*

The external current account remained under pressure in June, recording a third consecutive monthly deficit, while the first half of 2026 saw the merchandise trade deficit widen 67% as higher fuel and other imports linked to the Middle East conflict continued to outpace export growth despite resilient workers’ remittances and a narrowing monthly current account gap.

*Source: (Daily FT)* https://www.ft.lk/front-page/External-sector-deteriorates-in-1H-trade-deficit-widens-67-YoY/44-795477

*CBSL net FX purchases top $ 556 m as liquidity injections reach Rs. 262.5 b*

The Central Bank of Sri Lanka (CBSL) remained a net purchaser of foreign exchange during the first half of 2026, buying a net $ 556.3 million while injecting around Rs. 262.5 billion into the domestic money market through foreign exchange purchases and swap operations as it rebuilt reserves and sought to curb excessive exchange rate volatility.

*Source: (Daily FT)* https://www.ft.lk/front-page/CBSL-net-FX-purchases-top-556-m-as-liquidity-injections-reach-Rs-262-5-b/44-795479

*CBSL warns finance companies over inflated vehicle valuations, LTV breaches*

The Central Bank of Sri Lanka (CBSL) has directed all Licensed Finance Companies (LFCs) to strictly comply with its 2026 Loan-to-Value (LTV) Directions for motor vehicle financing, warning that inflated vehicle valuations and financing structures designed to bypass regulatory limits pose risks to the financial system.

*Source: (Daily FT)* https://www.ft.lk/front-page/CBSL-warns-finance-companies-over-inflated-vehicle-valuations-LTV-breaches/44-795480

*Vehicle import bill falls 27% M-o-M in June*

Expenditure on imported motor vehicles declined 27% month-on-month (M-o-M) to $ 182 million, according to the Central Bank of Sri Lanka’s (CBSL) latest External Sector Performance report.’

*Source: (Daily FT)* https://www.ft.lk/front-page/Vehicle-import-bill-falls-27-M-o-M-in-June/44-795481

*Import of goods on advance payment terms lawful*

The widely publicised so-called ‘phantom’ transfers of payments made to overseas manufacturers and exporters by Sri Lankan licensed commercial banks had been made under the ‘Special Import Licence and Payment Regulations No. 1 of 2011, in operation in Sri Lanka for over 15 years. 

*Source: (Daily FT)* https://www.ft.lk/front-page/Import-of-goods-on-advance-payment-terms-lawful/44-795482

*External deficits ease from April’s peak, but remain sharply wider than a year ago*

Sri Lanka’s current account and trade deficits narrowed for a second consecutive month in June 2026, easing off the peaks recorded in April, even as both measures remained substantially wider than a year earlier - underscoring that the external sector’s improvement is a moderation in the pace of deterioration rather than a reversal of the underlying pressure, according to the Central Bank of Sri Lanka’s (CBSL) External Sector Performance report for June.

*Source: (Daily Mirror)*https://www.dailymirror.lk/business-main/External-deficits-ease-from-Aprils-peak-but-remain-sharply-wider-than-a-year-ago/245-347208

*Auto importers urge unified tax in budget 2027 to unlock middle-class vehicle accessibility*

The Ceylon Automobile Importers Association is pushing for a comprehensive overhaul of Sri Lanka’s vehicle taxation system in the upcoming Budget 2027, proposing a unified fee structure designed to make cars affordable again for the country’s middle class. 

*Source: (Daily Mirror)* https://www.dailymirror.lk/business-news/Auto-importers-urge-unified-tax-in-budget-2027-to-unlock-middle-class-vehicle-accessibility/273-347207

*Inflation hits three-year high as CB’s target breach stretches to fourth month*

Sri Lanka’s headline inflation accelerated to 7.3 percent in July 2026, up from 6.8 percent in June — the highest reading since June 2023, when inflation was still unwinding from the 2022 economic crisis — marking the fourth consecutive month the Colombo Consumer Price Index (CCPI) has run above the Central Bank’s 5 percent target, as food prices surged and wage growth failed to keep pace with the cost of living.

*Source: (Daily Mirror)* https://www.dailymirror.lk/business-news/Inflation-hits-three-year-high-as-CBs-target-breach-stretches-to-fourth-month/273-347206

*Workers’ remittances, records 9.3% YoY increase amounting to US$ 695 Mn in June 2026*

The external sector continued to reflect the impact of developments in the Middle East, with the monthly current account recording a deficit in June 2026.  

*Source: (Daily News)*https://dailynews.lk/2026/08/03/business/1031415/workers-remittances-records-9-3-yoy-increase-amounting-to-us-695-mn-in-june-2026/

*Union Bank 2Q profit rises 26% on impairment reversal*

Union Bank of Colombo PLC reported a 26 percent increase in standalone profit after tax to Rs.253.3 million for the second quarter ended June 2026, as higher net interest income and an impairment reversal offset weaker operating income and rising costs.

*Source: (Daily Mirror)* https://www.dailymirror.lk/business-news/Union-Bank-2Q-profit-rises-26-on-impairment-reversal/273-347204

*Financials: Harischandra Mills PLC reports 147% PAT growth*

Harischandra Mills PLC, an Ambeon Group company, reported a strong financial performance for 1QFY27, with Profit After Tax (PAT) growing by 147% year-on-year to Rs 91.8 million. 

*Source: (the morning)*https://www.themorning.lk/articles/D5AlhlBQGG8BzYdzyvN7