Over the last few weeks, Sri Lanka has seen two big positive changes. The exchange rate has appreciated from above 335 LKR/USD to below 330 LKR/USD, and interest rates on government securities have fallen across the curve. At least part of this seems to be due to lower oil payments from the low points in June/July combined with some FX inflows as well.
Global oil prices have moved in the opposite direction. Compared to an average Brent crude price around USD 80-85/bbl in June and July, August is running closer to USD 90/bbl so far. Compared to the USD 70/bbl point around late June, this is a pretty significant increase. While this could be a negative, there are a few counterweights that can balance against this oil pressure such as the end of the USD 75 mn a month FX payment to the RBI. Any lower import pressure after mid-year import spikes, any continuation of remittance flows, any recovery in tourism, and support from port services and petroleum exports may buffer the current account as well.
Despite the potential “good news” on the horizon, there are also plenty of worries around as well. Will oil prices rise again? Will tourism continue to be weak? Will El Nino result in huge agricultural or energy impacts? Will domestic markets seize up again?
In this month’s report we explore our expectations of these positive and negative triggers, the likelihood of them transpiring and how we think businesses can position themselves in these market conditions.
Our clients would have already received a detailed report to their emails on this; alongside the numbers we associate with each of these varied scenarios. The full report has also been accessible on our Athena reports platform since the 25th August 2026. If you still haven’t had a chance to read through it, click here! If you are yet to be a subscriber, please do get in touch with us for a trial subscription to our reports at clientconnect@frontiergroup.info.