Colombo, 30 September 2026 – The Central Bank of Sri Lanka (CBSL) has released its “Monthly Economic Indicators – August 2026” report, offering a comprehensive snapshot of the nation’s economic performance. The data reveals a complex landscape, marked by a significant uptick in inflation, continued fiscal improvement, and moderate growth across key sectors, as the country navigates its path towards sustained stability.
The August 2026 report, compiled by the Statistics Department of the CBSL, provides crucial insights into real sector performance, government finance, monetary aggregates, external trade, and financial markets, among others. These indicators are vital for policymakers, businesses, and investors seeking to understand the underlying trends shaping the Sri Lankan economy.
Real Sector: Inflationary Surge Dominates Despite Sectoral Growth
One of the most striking observations from the August 2026 indicators is the notable increase in headline inflation. The National Consumer Price Index (NCPI) recorded a year-on-year change of 8.1% in August 2026, a significant jump from 1.5% in the corresponding period of 2025. Similarly, the Colombo Consumers Price Index (CCPI) rose to 8.0% year-on-year, compared to 1.2% in August 2025, signalling a broad-based inflationary environment.
In terms of output, the Gross Domestic Product (GDP) growth for the 2nd Quarter of 2026 stood at 4.2% at constant (2015) prices, a slight moderation from 5.0% in 2025. Industry proved to be the strongest contributor, growing by 7.3% (up from 5.7%), while the Services sector expanded by 2.7% (down from 4.0%). The Agriculture sector, however, contracted by 2.3% in the 2nd Quarter, after growing by 2.5% in the previous year.
Agricultural production showed mixed results for July 2026 (or January-June 2026 for coconut):
- Coconut production surged by 30.1% year-on-year to 1,747.0 million nuts (January-June).
- Paddy production (Maha season 2025/2026) saw robust growth of 14.2%, reaching 3,133.9 million kg. Yala season also grew by 16.8%.
- Tea production declined marginally by 1.1% to 21.3 million kg in July.
- Marine fish production contracted sharply by 20.0% to 19.9 million kg in July.
The Index of Industrial Production (IIP) registered a modest 0.2% year-on-year increase in July 2026, reaching 101.5 (2015=100). Electricity generation for June 2026 rose by 5.6% year-on-year to 1,589 GWh.
Fiscal and Monetary Landscape: Revenue Growth Continues
Sri Lanka’s fiscal performance for January-July 2026 showed encouraging signs, with total revenue and grants increasing by 25.1% year-on-year to Rs. 3,421,259 million. Recurrent expenditure also saw a more contained increase of 4.9% to Rs. 3,149,133 million, indicating continued efforts towards fiscal consolidation.
On the monetary front, broad money supply (M2) expanded by 11.2% year-on-year to Rs. 14,904.8 billion by end-July 2026. Consolidated broad money (M2b), which includes offshore banking units, grew by 12.1% to Rs. 17,043.5 billion. Credit to the private sector remained a significant driver of monetary expansion, showing a 12.1% increase (Jan-July) in the consolidated M2b survey.
External Sector: Trade Deficit Widens, Reserves Remain Steady
The external sector faced challenges in July 2026, with exports declining by 5.3% year-on-year to US$ 1,233 million. Imports, conversely, surged by 19.6% to US$ 2,251 million, leading to a significant widening of the balance of trade deficit to US$ 1,018 million from US$ 580 million in July 2025. The current account balance for January-March 2026 recorded a surplus of US$ 623 million, but this was a 34.3% decrease compared to the previous year.
Despite the widening trade deficit, the nation’s total reserves stood at a healthy US$ 13,247 million by end-July 2026, showing an increase from the previous months of May and June. Worker’s remittances, a crucial source of foreign exchange, continued their positive trend, increasing by 10.0% to US$ 749 million in August 2026, and by 19.8% year-on-year for January-August 2026 to US$ 6,131 million.
Tourism earnings also saw a slight increase of 2.1% in August 2026 to US$ 264 million, although cumulative earnings for January-August 2026 were down by 10.0% year-on-year.
Financial Markets and Interest Rates: Policy Rates Adjusted
The CBSL maintained a hawkish stance on monetary policy, with the Overnight Policy Rate (OPR) increasing by 100 basis points year-on-year to 8.75% in August 2026. Similarly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) also saw 100 bps increases, settling at 8.25% and 9.25% respectively. The Average Weighted Prime Lending Rate (AWPR) for the last week of August 2026 stood at 10.95%, up by 298 basis points year-on-year.
The Colombo Stock Exchange (CSE) witnessed modest performance. The All Share Price Index (ASPI) recorded a 1.6% year-on-year increase, closing at 21,338.69 points by end-August 2026. However, the S&P SL20 index saw a slight decline of 1.1% to 6,009.68 points. Market capitalization grew by 4.1% to Rs. 7,730.83 billion.
Sectoral Insights: Vehicle Registrations Boom, Construction Strengthens
New registrations of motor vehicles surged dramatically in June, July, and August 2026. August saw a 23.5% year-on-year increase, with a staggering 159.5% growth for January-August 2026 compared to the previous year. This boom was particularly evident in Three Wheelers (+52.7% in Aug), Motor Cycles (+26.3%), and Goods Transport Vehicles (+121.6%), reflecting improved economic conditions and consumer confidence.
The construction sector also showed positive momentum, with the Purchasing Managers’ Index – Construction Total Activity Index registering 59.4 in August 2026, indicating expansion. Cement production increased by 9.8% in July 2026, and total cement availability rose by 8.0%, supporting increased construction activity.
The latest “Monthly Economic Indicators – August 2026” underscores Sri Lanka’s continued economic recovery trajectory, albeit with the emerging challenge of rising inflation. Sustained fiscal discipline, prudent monetary policy, and efforts to boost productivity across key sectors will be crucial in solidifying this recovery and mitigating potential headwinds.
Source: Read original document
