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Sri Lanka recorded a significant widening of its merchandise trade deficit to USD 6.5 billion during the first seven months of 2026, driven by a surge in motor vehicle and fuel import costs.

Official economic data for the period ending July 2026 underscores how sharp increases in import expenditure alongside lower export revenues have strained the national trade balance.

Fuel imports remained a major contributor to the growing trade gap, with cumulative spending rising 59.9 percent year on year to reach USD 3.622 billion between January and July 2026.

Monthly fuel import costs stood at USD 453 million in July, representing a 68 percent jump compared to July 2025 due to higher crude oil purchases, despite a slight decline from the USD 465 million recorded in June.

Motor vehicle imports for both commercial and personal use reached USD 241 million in July, bringing the seven-month total for vehicle imports to USD 1.495 billion.

The widened trade deficit of USD 6.5 billion contrasts sharply with the USD 3.9 billion reported during the same period in 2025.

Despite these import pressures, gross official reserves reached USD 6.6 billion by the end of July 2026, supported by Central Bank foreign exchange purchases and an ongoing swap facility with the People's Bank of China.

Financial markets reflected this volatility as the Sri Lankan rupee depreciated 5.5 percent against the US dollar by late August 2026, though recent monetary, fiscal, and macroprudential measures have prompted a slight rebound in currency values.

The price of a loaf of bread will be increased by Rs. 10 from midnight today, according to the Bakery Owners’ Association.

The association announced the price revision, which will come into effect from midnight.

Sri Lanka is losing vast amounts of potential state revenue as up to 70 percent of the nation's gambling activity has migrated to online platforms operating largely outside the domestic tax net, according to tax and policy experts.

Tax expert Suresh Perera of KPMG Sri Lanka and Dr. Sudaraka Ariyarathne, a Research Fellow at the Advocata Institute, highlighted critical enforcement loopholes within the island's regulatory and fiscal frameworks.

The warnings come in the wake of recent state action on 5 August 2026, when authorities initially blocked 24 unlicensed gambling websites including major international platforms such as Stake, bet365, Betway, and 1xBet under the Gambling Regulatory Authority Act No. 17 of 2025, before expanding the ban to cover 122 platforms.

The revenue leakage stems primarily from foreign operators lacking a physical footprint in Sri Lanka, which allows them to evade the 45 percent corporate income tax and the betting and gaming levy despite serving local customers.

Suresh Perera stated that the state effectively collects zero revenue from the fastest-growing segment of the gaming industry because offshore operators simply ignore local levy requirements and fall outside traditional tax jurisdiction.

He noted that the government should focus on capturing these uncollected revenues from foreign operators rather than imposing additional tax burdens on lower and middle-income citizens, suggesting that Sri Lanka adopt modern tax concepts such as India's significant economic presence rule to tax non-resident digital entities.

Meanwhile, Dr. Sudaraka Ariyarathne pointed out that domestic and foreign digital platforms aggressively target young sports fans from lower socio-economic backgrounds with promises of easy wins that frequently lead to financial distress.

He noted that simple domain blocking remains ineffective because users bypass restrictions using virtual private networks, emphasizing instead the need to strictly regulate financial payment intermediaries and control digital marketing practices.

Member of Parliament Ravi Karunanayake has been arrested by the Commission to Investigate Allegations of Bribery or Corruption (CIABOC).

The arrest was made by CIABOC officials, although further details regarding the allegations or circumstances surrounding the arrest have not yet been released.

Sri Lanka recorded a 20.07 percent year-on-year surge in services export earnings for July 2026, reaching USD 351.92 million, according to data released by the Sri Lanka Export Development Board.

The official statistics published by the state export agency highlight performance metrics across key commercial sectors during the seventh month of the year, alongside cumulative trade figures for the first seven months of 2026.

The sub-sector breakdown reveals that transport and logistics drove the monthly expansion, generating USD 193.53 million in July, which represents a robust 40.02 percent increase compared to the corresponding period in 2025.

Construction exports experienced strong growth as well, expanding by 30.88 percent year-on-year to reach USD 13.09 million.

Information and Communication Technology together with Business Process Management recorded a modest uptick of 2.32 percent to achieve USD 143.24 million.

Financial services registered a sharp contraction of 57.25 percent during the month, falling to USD 2.10 million.

Commenting on the performance, Export Development Board (EDB) Chairman Mangala Wijesinghe said that the priority of the board is to sustain this positive growth momentum by enhancing the competitive edge of established sectors while simultaneously driving the creation of new products, services, and export destinations.

The sustained momentum across services exports underpins Sri Lanka's ongoing efforts to diversify its foreign exchange revenue streams, with total combined exports of goods and services reaching USD 1,637.26 million in July 2026 as export authorities focus on expanding into new international markets

Sri Lanka faces a heightened threat of dual natural disasters due to severe weather patterns triggered by predicted El Niño conditions, according to Opposition Leader Sajith Premadasa, who accused the government of failing to prepare adequate contingency plans.

Premadasa issued the warning in a post on X following a joint assessment by United Nations agencies, including the Food and Agriculture Organization (FAO), the World Food Programme (WFP), and the World Meteorological Organization.

The UN report identified Sri Lanka as a country of elevated concern as the island approaches the upcoming Maha cultivation season.

The UN assessment indicates that above-average rainfall could hit the island starting from October with the arrival of the Second Inter-Monsoon.

While increased precipitation can replenish depleted reservoirs, excessive rain during the crucial planting phase risks causing severe flooding, waterlogging, and significant delays to agricultural activities.

This threat comes alongside earlier forecasts of prolonged dry spells before the rains set in, creating a double risk of drought followed by floods and landslides.

Premadasa criticized the government for what he termed absolute negligence, noting that the lack of protective measures for lives and property is indefensible in light of clear scientific warnings.

The situation is further complicated by rising living costs, which could compound the burden on vulnerable farming communities across the country.

The National Water Supply and Drainage Board (NWSDB) has restricted water supply in parts of the Batticaloa District to four hours a day due to declining water levels at the Unnichchai Reservoir amid prevailing dry weather conditions.

NWSDB Chairman A.M.P.C.T. Bandara said the water supply is suspended daily from around 11.00 a.m. to 3.00 p.m. as the reservoir’s water level continues to fall.

However, Bandara said NWSDB-operated water treatment plants across the country continue to function as usual.

He said arrangements have been made to produce and distribute water at maximum capacity from the treatment plants to maintain supplies.

According to the NWSDB Chairman, Sri Lanka produces approximately 2.8 million cubic metres of water each day. Around 23% to 24% of this supply comes from major reservoirs, while nearly 65% is sourced from rivers and streams.

The Kelani River alone provides close to 600,000 cubic metres of water daily, accounting for nearly one-third of the country’s total water supply.

Bandara said the effects of the prevailing dry weather have so far been limited to the Batticaloa and Monaragala districts.

Water supply is also being managed in the Bibile and Medagama areas of Monaragala due to shortages in available water sources, he added.

Sri Lanka’s expressway network generated a record revenue of more than Rs. 355 million during the five-day holiday period last week, according to Road Development Authority (RDA) Director General Anuradha Hettiarachchi.

The revenue figure marks the highest amount recorded from expressway operations during a five-day holiday period, reflecting increased use of the road network during the break.

RDA Director General Anuradha Hettiarachchi confirmed the record revenue generated across the country’s expressways during the holiday period.

The latest figure highlights the significant level of traffic on Sri Lanka’s expressways during the five-day holiday, with motorists contributing more than Rs. 355 million in toll revenue.

A request has been made before the Court of Appeal to refer to the Supreme Court a petition seeking an order to invalidate the parliamentary seat of MP Ramanathan Archchuna.

The request was made today (31) by Attorney-at-Law Senany Dayaratne, who appeared on behalf of MP Archchuna, when the petition was taken up before the Court of Appeal.

However, the Court of Appeal stated that an order on the request would be issued at an appropriate time.

As BRICS prepares to meet in New Delhi, it would do well to understand not only what the United States is doing, but why.

The reported American move to gain majority control over more than 65 billion barrels of Venezuela’s proven oil reserves may appear to be another dramatic episode in Washington’s relationship with Caracas. But it may also offer a window into a much larger transformation in American strategy.

The United States is becoming increasingly concerned about its dependence on resources, technologies and supply chains that it does not control. In a world of intensifying geopolitical competition, Washington appears determined to secure the foundations of its economic, technological and military power.

*Oil is only one part of the equation.*

Critical minerals, semiconductors, artificial intelligence, electricity generation, shipping routes, data and financial infrastructure are becoming strategic assets. Venezuela’s oil, Greenland’s geography and mineral potential, the Middle East’s energy resources and the security of the Western Hemisphere may seem like separate issues. They are increasingly connected by a single concern: American vulnerability.

Artificial intelligence makes this question even more important. The next technological revolution will require enormous quantities of electricity, computing capacity, data centres and advanced chips. Those chips depend on complex global supply chains and critical minerals. The competition over artificial intelligence is therefore also becoming a competition over energy, minerals, manufacturing capacity and technology.
In this environment, dependence can become vulnerability.

*The same logic applies to finance.*

After the Second World War, the United States did not simply inherit Britain’s position as the leading global power. It helped create an international system that embedded American economic strength within a wider architecture.
Bretton Woods established the foundations of a monetary system centred on the dollar. The Marshall Plan helped rebuild Europe. NATO institutionalised American security commitments. The United Nations provided a framework for international cooperation.
The dollar subsequently became the principal currency of global trade and finance as British power and sterling declined.

This was one of the great strategic achievements of the twentieth century. American power was multiplied because other countries had an interest in participating in the system.

Today, however, that system is under pressure.
China has emerged as an economic and technological competitor. Alternative payment mechanisms are developing. Countries are diversifying their reserves. Digital currencies, cryptocurrencies and stablecoins could eventually change the architecture of international payments.

Washington therefore has a powerful incentive to ensure that the next generation of financial and technological infrastructure does not erode American influence.
This brings us to the central strategic dilemma facing the United States.

A great power that feels increasingly vulnerable naturally seeks greater control. It wants secure energy supplies, critical minerals, resilient supply chains, technological superiority and strategic access.

Some of this is entirely rational.
But there is a danger that the pursuit of security through ever greater control can create the insecurity it seeks to prevent.
History provides some uncomfortable lessons.
The British Empire possessed extraordinary naval, commercial and financial power. Yet the cost of maintaining a worldwide empire eventually became difficult to sustain.

The Soviet Union possessed enormous military capabilities, but military power could not compensate indefinitely for economic and technological weaknesses.

The United States after 1945 followed a different path. Rather than simply controlling territory and resources, it created institutions, alliances and markets through which American power could operate.

*That distinction matters today.*

A great power that feels insecure naturally seeks greater control. It wants secure energy supplies, critical minerals, resilient supply chains, technological superiority and strategic access.

But there is a danger in confusing security with possession.

If every major power attempts to control the resources, technologies, markets and strategic routes on which its security depends, the world could fragment into competing economic and geopolitical fortresses.

The emerging international environment already contains elements of several competing visions. Samuel Huntington’s “clash of civilizations” captures the cultural and political fragmentation of the world. Graham Allison’s “Thucydides Trap” describes the dangers inherent when a rising power challenges an established one. And the increasingly competitive struggle Trending Stories

The next technological revolution will require enormous quantities of electricity, computing capacity, data centres and advanced chips. Those chips depend on complex global supply chains and critical minerals. The competition over artificial intelligence is therefore also becoming a competition over energy, minerals, manufacturing capacity and technology.
In this environment, dependence can become vulnerability.

*The same logic applies to finance.*

After the Second World War, the United States did not simply inherit Britain’s position as the leading global power. It helped create an international system that embedded American economic strength within a wider architecture.
Bretton Woods established the foundations of a monetary system centred on the dollar. The Marshall Plan helped rebuild Europe. NATO institutionalised American security commitments. The United Nations provided a framework for international cooperation.
The dollar subsequently became the principal currency of global trade and finance as British power and sterling declined.

This was one of the great strategic achievements of the twentieth century. American power was multiplied because other countries had an interest in participating in the system.

Today, however, that system is under pressure.
China has emerged as an economic and technological competitor. Alternative payment mechanisms are developing. Countries are diversifying their reserves. Digital currencies, cryptocurrencies and stablecoins could eventually change the architecture of international payments.

Washington therefore has a powerful incentive to ensure that the next generation of financial and technological infrastructure does not erode American influence.
This brings us to the central strategic dilemma facing the United States.

A great power that feels increasingly vulnerable naturally seeks greater control. It wants secure energy supplies, critical minerals, resilient supply chains, technological superiority and strategic access.
Some of this is entirely rational.

But there is a danger that the pursuit of security through ever greater control can create the insecurity it seeks to prevent.
History provides some uncomfortable lessons.
The British Empire possessed extraordinary naval, commercial and financial power. Yet the cost of maintaining a worldwide empire eventually became difficult to sustain.

The Soviet Union possessed enormous military capabilities, but military power could not compensate indefinitely for economic and technological weaknesses.

The United States after 1945 followed a different path. Rather than simply controlling territory and resources, it created institutions, alliances and markets through which American power could operate.

*That distinction matters today.*

A great power that feels insecure naturally seeks greater control. It wants secure energy supplies, critical minerals, resilient supply chains, technological superiority and strategic access.

But there is a danger in confusing security with possession.

If every major power attempts to control the resources, technologies, markets and strategic routes on which its security depends, the world could fragment into competing economic and geopolitical fortresses.

The emerging international environment already contains elements of several competing visions. Samuel Huntington’s “clash of civilizations” captures the cultural and political fragmentation of the world. Graham Allison’s “Thucydides Trap” describes the dangers inherent when a rising power challenges an established one. And the increasingly competitive struggle for resources and security can sometimes resemble the logic of Mad Max.

The combination would be dangerous.
This is where BRICS has an important role.
As the grouping prepares to meet in Delhi, its members need to understand the American calculation before formulating their own response. It would be tempting to interpret Washington’s actions simply as an effort to contain China, preserve dollar dominance or prevent the emergence of a multipolar world.
There is some truth in each interpretation.
But the deeper concern is vulnerability.
The United States fears dependence on foreign energy, minerals, technologies, supply chains and financial systems at precisely the moment when artificial intelligence and advanced technologies are transforming the meaning of national power.

BRICS should therefore be careful not to respond by simply constructing another system of exclusive blocs.
Its objective should be resilience rather than isolation: diversified supply chains, greater technological capability, secure energy networks and more efficient financial mechanisms, while preserving the channels of trade and dialogue that connect the major powers.

India has a particularly important role to play.
It has an interest in a genuinely multipolar international system, but it also has an interest in a stable relationship with the United States. India therefore has something that many other powers lack: the ability to understand both sides of the emerging strategic equation.
Understanding American insecurity is as important as understanding American power.
For Washington, meanwhile, there is an equally important lesson.

America does not need to control everything to remain the world’s most important power. It possesses an extraordinary combination of military strength, financial depth, technological innovation, universities, entrepreneurial capacity, natural resources and alliances.
Its greatest strategic asset may still be its ability to make other countries want to participate in a system shaped by American leadership.

Washington should therefore distinguish between control and leadership.
It should secure critical supply chains without necessarily monopolising them; maintain technological leadership while allowing allies to participate in innovation; strengthen energy security without turning every resource-rich country into a strategic possession; and preserve the dollar by maintaining the openness and credibility of American financial markets.

Most importantly, it should invest in alliances and institutions.

The United States does not need to retreat from the world. Nor should it ignore genuine vulnerabilities. The era in which economic interdependence was assumed automatically to overcome geopolitical rivalry is clearly over.
But there is a fundamental difference between an empire that seeks to possess the world and a power that seeks to organise it.

The United States will remain the world’s most important power for the foreseeable future. But its relative dominance is increasingly being challenged by the diffusion of economic, technological and military capabilities.
Its answer should not be withdrawal.
Nor should it be permanent expansion.
The objective should be strategic primacy through an open system.

That may also be the most important message for BRICS as it gathers in Delhi.
The emerging international order will not be determined simply by who controls the most oil, minerals, technology or territory.
It will ultimately be determined by who can build a system that others believe is worth participating in.

The country that controls the system does not need to control everything within it.

By Milinda Moragoda

_(Milinda Moragoda is founder of the Pathfinder Foundation, a strategic affairs think tank. can be contacted via This email address is being protected from spambots. You need JavaScript enabled to view it.. courtesy www.wionews.com on 30.08.2026
https://sl1nk.com/9af6ank)_