Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Finance and Planning

¶ 01 Mr. Speaker, my responses:

¶ 02 1. On rupee depreciation: During 2026, rising external sector pressures and elevated global uncertainties created depreciation pressure against the US dollar and other major reserve currencies. From early 2026, following the escalation of Middle East tensions, global uncertainty increased. As at 18 May 2026, the Sri Lankan rupee had depreciated by about 4.8 percent against the US dollar. Several regional currencies have depreciated by more. The dollar has strengthened broadly as investors shifted to safe assets amid geopolitical tensions, higher oil prices, uncertainty over global growth, and portfolio outflows from emerging markets.

¶ 03 Higher global oil prices have raised Sri Lanka’s fuel and gas import bill, adding pressure on the rupee. Disruptions to key Middle Eastern aviation hubs affected tourism receipts. Negative expectations have also pressured the FX market: exporters have delayed conversions on expectations of depreciation, while importers have front-loaded orders and FX purchases. There have also been outflows from government securities and the equity market. Heightened uncertainty and herd behaviour increased demand relative to supply.

¶ 04 Policy stance: The Central Bank operates a flexible exchange rate, allowing market demand and supply to determine the rate, without targeting a fixed level. Flexibility helps absorb shocks and supports external stability. Rupee depreciation is not inherently harmful; its impact is mixed across sectors. Excessive volatility is the key risk; current movements do not indicate disorderly volatility.

¶ 05 Outlook and measures: If Middle East tensions ease, FX pressure should moderate. We expect inflows under the IMF Extended Fund Facility—two tranches totalling about USD 700 million by end-May—ADB disbursements of about USD 380–480 million by year-end, World Bank USD 150 million by June, and an additional USD 50 million from a related institution, with further multilateral inflows thereafter. These will support the balance of payments.

¶ 06 To manage demand, the QR-based fuel allocation system has continued since mid-March 2026 to contain fuel consumption. From 16 May, for three months, a 50 percent surcharge (on top of the prevailing 30 percent tariff) was imposed on private vehicle imports other than three-wheelers and motorcycles—equivalent to a 15 percent final levy on such imports; commercial vehicles such as buses and lorries are exempt. This is aimed at temporarily deferring private vehicle imports to conserve FX. Vehicles already imported or with LCs opened up to 15 May should not see price increases.

¶ 07 2. Public hardship: We acknowledge general pressure on the public, though we do not accept that an unbearable burden affects the majority. The Government has significantly expanded social spending and targeted programmes: the Aswasuma programme and other targeted measures; the 2025 Budget included school supplies for children; and due to the Middle East situation, an additional LKR 100 billion has been allocated for relief.

¶ 08 Examples: - Fuel relief: LKR 100 per litre for diesel and LKR 20 per litre for petrol, totalling about LKR 19 billion. - Additional support to Aswasuma beneficiaries and low-income groups: about LKR 8.475 billion. - Electricity relief: About 95 percent of consumers use under 180 units; their tariffs were protected so that bills do not rise for those consuming under 180 units. - Yala season agriculture support: LKR 2.65 billion. - Small tea growers: LKR 2.5 billion. - Fisheries sector: about LKR 4.121 billion. Total planned additional support around LKR 100 billion; about LKR 92 billion to be spent, with about LKR 8 billion for tourism and other targeted sectors.

¶ 09 3. Household indebtedness: We recognise indebtedness among low-income rural households and micro-entrepreneurs, especially due to borrowing from unregulated microfinance entities and low financial literacy, particularly among rural women. To address this, the Government has initiated the Microfinance and Credit Regulatory Authority Bill to regulate the informal financial sector and establish the Authority; regulatory functions are expected to commence in Q1 2027. We are also seeing a shift from informal to formal finance: bank lending increased by over LKR 2,000 billion in 2025. The Aswasuma benefit has been increased to strengthen incomes. We will implement financial literacy programmes to reduce vulnerability. Structural solutions will be phased, as the issues have built up over decades.

¶ 10 4. Poverty lines: Updated district poverty lines based on NCPI (March 2026) are as follows (monthly per capita):

¶ 11 - National: 6,690 - Colombo: 8,000; Gampaha: 7,908; Kalutara: 7,520; Kandy: 6,942; Matale: 6,918; Nuwara Eliya: 7,551; Galle: 6,958; Matara: 6,300; Hambantota: 6,216; Jaffna: 6,288; Mannar: 7,095; Vavuniya: 6,673; Mullaitivu: 6,573; Kilinochchi: 6,124; Batticaloa: 6,781; Ampara: 6,823; Trincomalee: 6,262; Kurunegala: 6,395; Puttalam: 7,037; Anuradhapura: 6,288; Polonnaruwa: 6,331; Badulla: 6,814; Monaragala: 5,958; Ratnapura: 6,764; Kegalle: 7,451.

¶ 12 Definition: The official poverty line reflects the minimum monthly expenditure required for an individual to live with basic necessities, meeting a minimum daily calorie requirement of 2,030 Kcal and essential non-food needs. For a four-member household in March 2026, the national minimum monthly expenditure is about LKR 66,760; district values range roughly from LKR 63,832 (Monaragala) to LKR 72,000 (Colombo).