Sri Lanka Economy Shows Strong Start to 2026

Tourism Surge and Renewable Energy Gains Mark Second Week of January

COLOMBO, January 12, 2026 – Sri Lanka’s economy is off to a robust start in the new year, with record tourism arrivals and major infrastructure milestones signaling continued recovery momentum in the second week of 2026.

IMF Review Underway as Reforms Progress

Official-level discussions commenced this week between the Ministry of Finance and the International Monetary Fund regarding the fourth review of the Extended Fund Facility. The talks are centered on the implementation of the new property tax system and ongoing governance reforms, marking a critical checkpoint in Sri Lanka’s economic stabilization program.

Tourism Hits Record High

The Sri Lanka Tourism Development Authority reported a 15% surge in visitor arrivals, with more than 85,000 tourists entering the country in the first 10 days of January compared to the same period last year. High-spending travelers from Western Europe and Russia are driving the boom, with hotels in the Cultural Triangle and Southern coastal regions reporting occupancy rates exceeding 90%.

The tourism revival has created a seasonal labor shortage in the hospitality sector, pushing up daily wages for service staff in popular tourist destinations. Ancillary services, including domestic aviation and luxury transport, have also recorded significant revenue increases.

Renewable Energy Milestone Achieved

In a major development for the energy sector, the first phase of the Mannar-Pooneryn wind power project was successfully connected to the national grid this week. The milestone represents a significant step in reducing the Ceylon Electricity Board’s dependence on expensive thermal power generation.

Corporate Sector Shows Confidence

John Keells Holdings announced a partnership with a global gaming operator for the entertainment hub within its flagship Cinnamon Life project, signaling the company’s push toward integrated resort operations.

Meanwhile, Hayleys PLC reported success in expanding its eco-friendly textile exports to the US market, securing a new contract with a major global athleisure brand.

The Colombo Stock Exchange’s All Share Price Index closed the week up 0.8%, with investor interest concentrated in banking stocks and blue-chip diversified holdings.

Technology Exports Gain Traction

The Export Development Board highlighted a 12% year-on-year growth in IT-BPM exports, with local tech firms increasingly winning contracts for AI-driven logistics solutions in the Middle East market.

Government Rolls Out Investment Reforms

The Board of Investment officially launched a fully digitized Single Window portal designed to streamline foreign direct investment approvals. The system aims to reduce approval times for new projects to under 30 days.

The government also announced a revised rebate scheme for value-added agricultural exports such as cinnamon and pepper, intended to encourage domestic processing rather than bulk raw material exports.

On January 11, authorities implemented a minor downward revision in retail petrol prices, reflecting stabilized global oil markets and a stronger Sri Lankan rupee.

Economic Indicators Remain Stable

The Sri Lankan rupee held steady against the US dollar, trading in the 295-300 range throughout the week. Currency stability has helped keep prices of imported essentials, including milk powder and medicine, relatively steady for consumers.

The banking sector remains liquid, though credit growth to the private sector has been slower than expected as businesses await further interest rate cuts.

Tea prices at the Colombo Tea Auction remained firm due to strong demand for “Bright Leafy” grades, though the agriculture sector continues to grapple with high fertilizer costs and labor shortages.

Citizens Feel Mixed Impact

While headline inflation remains within the single-digit target range, citizens continue to adjust to high electricity costs and recently implemented indirect taxes. The fuel price reduction has provided modest relief to daily commuters.

Analysts say the coming weeks will be crucial in determining whether the early-year momentum can be sustained through the first quarter of 2026.