Colombo, Sri Lanka – 02 October 2026 – The Central Bank of Sri Lanka (CBSL) today released its “Weekly Economic Indicators” report for October 02, 2026, offering a comprehensive snapshot of the nation’s economic performance across various sectors. The latest data reveals a mixed landscape, with notable developments in inflation, employment, government finance, and external trade, as reported by DailyFC.
Real Sector: Inflation Holds, Employment Shifts, Oil Prices Fluctuate
In the real sector, headline inflation, as measured by the Colombo Consumer Price Index (CCPI, 2021=100), remained unchanged at 8.0 percent in September 2026, consistent with August 2026 figures. Food inflation stood at 8.7 percent, while Non-Food inflation was recorded at 7.7 percent. However, CCPI-based core inflation saw a slight increase to 5.4 percent in September 2026 from 5.1 percent the previous month, indicating persistent underlying price pressures.
The Purchasing Managers’ Index (PMI) for the Construction Industry, reflected by the Total Activity Index, demonstrated month-on-month expansion in August 2026. On the labour front, the unemployment rate increased to 4.0 percent in Q2 2026, up from 3.8 percent in Q2 2025. Conversely, the Labour Force Participation Rate rose to 50.0 percent in Q2 2026, compared to 49.3 percent in Q2 2025.
Global crude oil prices experienced volatility during the period of September 28 to October 02, 2026. Initially, prices declined due to signs of recovering oil exports from the Middle East. However, renewed supply concerns, stemming from China’s halt of fuel exports and increased US military deployment in the Middle East, led to an increase towards the end of the week. Overall, Brent prices decreased by US dollars 3.19 per barrel, and WTI prices by US dollars 0.13 per barrel, compared to the previous week.
Monetary Sector: Lending Rates Edge Up, Stock Market Dips
The monetary sector saw an uptick in key interest rates. The Weekly Average Weighted Prime Lending Rate (AWPR) for the week ending October 02, 2026, increased by 10 basis points to 11.04 percent. Similarly, the Average Weighted Call Money Rate (AWCMR) rose to 8.99 percent on October 02, 2026, from 8.96 percent a week earlier. Reserve money also increased, primarily due to higher deposits held by commercial banks with the Central Bank.
Market liquidity remained in surplus, recording Rs. 360.11 billion by October 02, 2026, a slight decrease from the Rs. 370.92 billion surplus reported at the end of the previous week. In the equity market, both the All-Share Price Index (ASPI) and the S&P SL 20 Index registered declines, falling by 1.07 percent to 20,812.64 points and 0.96 percent to 5,883.50 points, respectively, compared to the previous week’s closing values.
Fiscal Sector: Budget Shifts to Surplus, Debt Remains
A positive development in the fiscal sector is the overall budget balance, which recorded a surplus of Rs. 35.4 billion during the eight months ending August 2026. This is a significant improvement compared to a deficit of Rs. 411.0 billion in the corresponding period of 2025. This turnaround was driven by a substantial 21.2 percent increase in government revenue and grants, reaching Rs. 4,002.3 billion, while total expenditure and net lending rose by a more modest 6.9 percent to Rs. 3,966.9 billion over the same period.
Regarding financing, net domestic financing recorded a net repayment of Rs. 65.1 billion, a stark contrast to the net domestic financing of Rs. 462.9 billion in the first eight months of 2025. Net foreign financing amounted to Rs. 29.7 billion, shifting from a net repayment in the previous year. Outstanding central government debt stood at Rs. 31,278.43 billion at the end of June 2026, with domestic debt at Rs. 18,804.64 billion and foreign debt (in rupee value) at Rs. 12,473.79 billion. Treasury Bill and Bond yields remained broadly stable, with an encouraging approximately 1 percent increase in T-Bills and T-Bonds held by foreign investors in the reporting week, and an oversubscription rate of approximately 2.5 times at the T-Bill auction.
External Sector: Rupee Depreciation Continues, Trade Deficit Widens
The external sector faced challenges, with the Sri Lanka Rupee depreciating by 6.2 percent against the US dollar year-to-date as of October 02, 2026. The CBSL’s net absorption from the domestic foreign exchange market amounted to US dollars 64 million in September 2026. Gross official reserves were provisionally estimated at US dollars 6,929 million at the end of August 2026, which includes proceeds from the People’s Bank of China (PBOC) swap arrangement.
The merchandise trade deficit significantly widened to US dollars 7,180 million during the eight months ending August 2026, compared to US dollars 4,264 million in the corresponding period of 2025. This expansion was primarily due to a 24.1 percent year-on-year increase in import expenditure to US dollars 16,557 million, while export earnings grew by a modest 3.3 percent to US dollars 9,377 million. The terms of trade deteriorated by 4.1 percent in August 2026, indicating that import prices rose faster than export prices.
The latest CBSL report underscores the ongoing complexities in Sri Lanka’s economic recovery, with positive fiscal adjustments and resilient labour force participation coexisting with inflationary pressures, a weakening rupee, and a widening trade deficit. Continuous monitoring and strategic policy interventions will be crucial in navigating these dynamics.
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