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Sri Lanka's economy has drifted off course, according to the latest assessment by an International Monetary Fund team that spent six days in Colombo led by Evan Papageorgiou.

The government has worked hard to soften the message for public consumption, but the underlying reality is harder to disguise.

Inflation on the rise

Inflation has climbed from 1.6 percent in February to 5.5 percent in May, a pace that monetary economists find deeply concerning.

It is not the absolute figure that worries analysts but the speed and direction, which point to structural pressure rather than a passing fluctuation.

Many households already feel that the real cost of living has risen well beyond the official number.

The Central Bank has responded with a 100 basis point increase in its policy rate alongside fresh macroprudential measures.

Businesses carrying debt now face higher servicing costs, households with loans face heavier monthly burdens, and entrepreneurs are forced to reconsider investment plans against a backdrop of higher financing costs and uncertain demand.

Reserves lose momentum

Foreign reserve accumulation, widely regarded as the clearest indicator of Sri Lanka's post crisis recovery, has slowed considerably.

This matters because reserves determine how much external shock the economy can absorb.

The slowdown comes precisely as pressures from the Middle East conflict, US tariff volatility and broader global uncertainty intensify, narrowing the margin for error.

Tourist arrivals growth has also slowed, compounding the problem.

Tourism remains one of the country's most dependable sources of dollar inflows, and weaker growth in this sector removes one of the few reliable supports for currency stability.

Relief package raises questions

The government has introduced a temporary relief package covering fuel, electricity and fertiliser subsidies, along with cash transfers for vulnerable households.

The political rationale is clear, but the economic logic is more complicated.

Every rupee spent on subsidies adds to fiscal expenditure, either widening the deficit or requiring additional revenue. Loosening fiscal policy after painful IMF mandated consolidation runs counter to programme requirements.

Papageorgiou's call for Sri Lanka to stick to its reform path carries specific weight. Authorities are expected to return to a primary balance target of 2.3 percent of GDP in 2027, a firm condition tied to the release of remaining loan tranches rather than a mere suggestion.

What happens after the programme

The IMF programme is due to end by March 2027. Beyond that date, there is no publicly articulated strategy for maintaining fiscal discipline, managing external financing needs or defending currency stability without the institutional support the programme currently provides.

This absence of clarity concerns investors, businesses and creditors alike. Sri Lanka emerged from the 2022 collapse largely because the IMF programme offered a credible commitment mechanism that unlocked financing and reassured markets that policy discipline would hold.

Without a successor arrangement, that mechanism disappears at a time when external confidence remains essential.

Businesses caught in the uncertainty

Heavy taxation has become an existential burden for businesses already contending with currency volatility, elevated borrowing costs and weaker consumer demand.

Added to this is uncertainty stemming from US tariff volatility, which makes export oriented planning increasingly difficult.

Faced with too many unknowns, businesses are struggling to plan even eighteen months ahead, resulting in hesitation, confusion and minimal job creation.

A question of credibility

The Dissanayake government inherited a stabilised though fragile economy along with a clear reform roadmap.

The external shocks now facing the country, from the Middle East conflict to global trade disruption, are real and not of the government's making. But explaining these pressures does not amount to a strategy for managing them, nor does it offer a vision for the economic architecture that should follow the IMF programme.

Sri Lanka's creditors, trading partners and investors are not questioning whether the Middle East conflict is real.

They want to know whether the country has a coherent plan for the period after the programme ends, whether fiscal discipline can be sustained without external enforcement, and whether reforms in tax compliance, state enterprise management and public financial management will continue once conditionality no longer applies.

These questions remain largely unanswered, with official communication focused more on reassurance than on strategy.

Markets, however, do not price reassurance. They price credibility, which is built through honest acknowledgment of challenges and consistency between promises and policy.

The IMF's verdict has confirmed what the data already suggested. Sri Lanka is off course, and while the reform programme still provides enough structural support to prevent an immediate crisis, that borrowed time is running out.

March 2027 is not far away, and the window for building a credible post programme strategy is closing faster than official messaging suggests.

Around 46,000 children who have been subjected to abuse and exploitation are still awaiting justice, Opposition Leader Sajith Premadasa said, calling on the government to expedite legal proceedings relating to child abuse cases.

The remarks were made during a discussion on child protection issues held at the Opposition Leader's Office.

Delays in investigating and prosecuting complaints, Premadasa said, had denied many victims justice during their childhood, and he urged authorities to take immediate steps to ensure timely legal redress.

The National Child Protection Policy came under particular criticism from the Opposition Leader.

Launched in 2019 with the intention of being implemented by 2025, the policy has since been postponed until 2029, a decision Premadasa described as an injustice to children.

Support from the SJB would be extended to any initiative aimed at strengthening child protection, Premadasa said, including the immediate implementation of the policy this year.

He noted that around 4,000 child abuse cases are currently pending before courts and called for measures to expedite hearings.

A Presidential Task Force to fast track investigations and ensure justice for all complainants was proposed by Premadasa, who stressed that child protection should not be politicised.

Sri Lanka's push to make exports the primary driver of economic growth is running into significant headwinds, as rising import costs, weakening tourism income and persistent currency depreciation continue to erode foreign exchange gains despite steady export growth.

The Sri Lanka Export Development Board recently unveiled its National Export Development Plan 2026 to 2030, targeting USD 20 billion in export earnings this year, rising to USD 36 billion by 2030.

Merchandise exports are expected to contribute USD 15.7 billion, with services generating a further USD 4.3 billion during 2026.

However, the latest external sector data from the Central Bank suggests these targets may prove difficult to achieve under current conditions.

The country's external current account recorded a deficit of USD 194 million in May, the second consecutive monthly shortfall.

This was driven largely by a widening merchandise trade deficit and a slowdown in the services surplus, even as workers' remittances continued to strengthen.

Between January and May, Sri Lanka's cumulative merchandise trade deficit widened sharply to around USD 4.7 billion, up from USD 2.7 billion during the same period last year.

Preliminary estimates suggest the gap worsened further in June, with imports remaining above USD 2 billion while exports were estimated at only USD 1.15 billion to USD 1.25 billion.

Analysts believe the monthly trade deficit approached US$900 million, pushing the cumulative mid year trade gap beyond USD 5.5 billion.

Global developments have added further pressure. Escalating tensions in the Middle East have pushed up international oil prices and freight charges, raising Sri Lanka's import bill.

Fuel import expenditure surged 112 percent year on year to US$536 million in May, driven by both higher global prices and increased import volumes.

The easing of vehicle import restrictions has also strained foreign exchange reserves, with spending on motor vehicle imports exceeding USD 1.07 billion during the first five months of the year.

Tourism, expected to provide a significant boost to foreign exchange earnings, has also underperformed.

Although tourist arrivals surpassed one million during January to May, earnings fell 11.9 percent to USD 1.36 billion compared with the same period last year.

June arrivals also declined year on year, raising concerns that visitor growth is not translating into higher spending.

Workers' remittances remain one of the few bright spots, with inflows rising 26 percent during the first five months to USD 3.9 billion, helping cushion external sector pressures.

Gross official reserves also improved to US$6.9 billion by the end of May, following disbursements under the International Monetary Fund's Extended Fund Facility.

Despite these gains, the Sri Lankan rupee weakened by 7.9 percent against the US dollar by the end of June, underlining continued external vulnerabilities.

Economists say that unless export growth accelerates alongside stronger global demand and greater diversification into higher value products, Sri Lanka's ambitious export strategy risks being undermined by an import bill that continues to outpace the country's foreign exchange earnings.

A 23-year-old youth has been arrested in connection with an alleged online financial scam in which a victim was defrauded of Rs. 4,386,219, police said.

The arrest was made following a complaint received by the North Western Province Unit of the Computer Crime Investigation Division (CCID).

Investigations have revealed that the fraud was carried out through contacts established via Facebook and Telegram.

Police further stated that the suspect is alleged to have fraudulently obtained Rs. 4,386,219, of which Rs. 500,000 had already been misappropriated.

The suspect has been identified as a 23-year-old resident of Beruwala.

The North Western Province Unit of the CCID is conducting further investigations into the incident. 

(Adaderana.lk)

A three-year-old boy has been pulled alive from the rubble six days after the devastating earthquakes in Venezuela, a Jordanian rescue team has said.

Video footage shows rescuers cheering as the child, named as Klieber Morán by the country's interim president, is pulled from wreckage in La Guaira state.

Delcy Rodríguez described the child's rescue as a moment of hope.

It comes as UN warned that tens of thousands of people were urgently in need of food and shelter.

The death toll from last week's quakes - with magnitudes of 7.2 and 7.5 - has risen to 1,943 with more than 10,000 people injured and tens of thousands more unaccounted for.

The massive tremors probably damaged or destroyed 58,870 buildings, according to an initial assessment of satellite data from NASA.

The Jordanian civil defence said Klieber had been given first aid treatment, taken to a hospital and his vital signs were good. He was being treated in the capital Caracas, Venezuelan Assembly President Jorge Rodríguez said.

The rescue comes well after the initial three-day period immediately after the quake during which experts say people trapped under debris have the best chance of being found alive.

La Guaira is one of the hardest hit areas, with many local people trying to carry out rescue efforts themselves.

The UN's refugee agency said on Tuesday that food shortages were widespread, basic services had broken down and communications had been largely severed in La Guaira.

"Community tensions are rising as access to assistance remains constrained," the UNHCR said in a statement on its website.

Daniela Armas, an 18-year-old vendor in La Guaira who was injured falling from a motorbike when the quakes struck, told AFP that some supplies were being distributed “but sometimes people nearly kill each other for food... it's like a cockfight.”

The UNHCR said that it needed an initial $15m to "scale up protection, core relief items, and temporary shelter support for 30,000 earthquake-affected people over six months".

Meanwhile the World Health Organization (WHO) said health services were under “extreme pressure.”

"There's an increased risk now of outbreaks of vaccine-preventable diseases" such as measles and diphtheria due to low vaccination coverage, WHO spokesman Christian Lindmeier said.

Jorge Rodríguez said Klieber's rescue showed there was still hope of continuing to find people alive and that domestic and international teams were still searching through rubble. Shelters were already open in La Guaira and other states, he added.

International rescue teams from the US, Mexico and dozens of other countries searched for survivors with trained dogs and heavy equipment.

Some international aid is arriving in the country. A UN spokesperson said a 47-tonne shipment of humanitarian supplies arrived on Tuesday including emergency health kits for urgent medical care, supplies for safe births, newborn care and disease prevention.

Meanwhile Venezuelans have begun burying the dead who have been found so far. Many more are waiting for the remains of loved ones who are presumed dead.

At the makeshift morgue at La Guaira's port, Wilker Molalla told AFP he was waiting to identify the remains of his sister, her children and the children of his brother.

"There were 11 people in my household," he said. “Only two of us survived because we were at work.”

Source: BBC

The Welfare Benefits Board has announced that payments for June under the “Aswesuma” welfare benefit scheme for senior citizens aged over 70 will be credited to beneficiaries’ bank accounts tomorrow (03).

According to the Board, arrangements have been made to deposit funds in two phases.

Under the first phase, a total of Rs. 3,108,805,000 will be credited to the accounts of 621,761 beneficiaries aged over 70.

In the second phase, Rs. 380,695,000 will be deposited into the Aswesuma bank accounts of 76,139 beneficiaries within the same age group.

The Welfare Benefits Board stated that the payments are being processed to ensure timely financial assistance to eligible senior citizens under the welfare programme.

A 61-year-old man has died after being attacked by a tamed elephant in the Karalliyadda area of Menikhinna, according to police.

The incident reportedly occurred on the night of June 30 while the victim, a resident of Menikhinna, was feeding the elephant.

Police said they launched an investigation after receiving information about the death. Preliminary inquiries suggest the attack took place as the man was providing food to the animal.

Further investigations into the incident are being conducted by the Menikhinna Police.

UNICEF has estimated that around 1.8 million people, including 680,000 children, require humanitarian assistance following the quakes.

The death toll from two devastating earthquakes that struck northern Venezuela last week has risen to 1,943, authorities said on Tuesday.

A further 10,571 people have been injured and 28,380 are receiving care in hospitals or temporary camps following the quakes, according to Jorge Rodríguez, the president of the country's National Assembly.

Back-to-back 7.2- and 7.5-magnitude tremors hit Venezuela on the evening of 24 June, causing widespread destruction and leaving tens of thousands of people missing. A strong aftershock also rattled the region on Friday, sending people fleeing into the streets as the ground shook once again.

Emergency crews and volunteers have since been racing to rescue those trapped under collapsed buildings, with rescuers from around the world joining local crews to dig through the rubble. The first 72 hours are said to be the most crucial for successful rescues. It has been almost a week since the quakes hit.

Video footage on social media shows emergency responders navigating small, unstable crawl spaces as they attempt to get to survivors.

Venezuela's acting president, Delcy Rodríguez, said on Monday that 3,681 rescuers from 30 countries had joined the search efforts. The international community has also provided over 1,000 tons of supplies, 27 vehicles, and 118 search dogs, she added.

More than 6,450 people have been found alive as of Tuesday, with a further 13,500 able to escape by themselves, per Venezuela's government.

UNICEF has estimated that around 1.8 million people, including 680,000 children, require humanitarian assistance following the quakes.

A preliminary estimate from the United Nations Development Programme has put the cost of direct physical damage caused by the tremors at $6.7 billion.

Source: Euro News