President Anura Kumara Dissanayake (AKD) and his Janatha Vimukthi Peramuna (JVP)-led National People’s Power (NPP) Government enter the second half of 2026 at a crucial moment. Having inherited an economy emerging from its worst crisis in decades, the administration has sought to project stability while pursuing an ambitious reform agenda under the International Monetary Fund (IMF) programme. However, a series of recent economic indicators presents a more nuanced picture, one that offers reasons for cautious optimism, but also underscores the fragility of the recovery.

Sri Lanka’s return to the World Bank’s Upper Middle-Income category, following reported real GDP growth of 5% in 2025, has been widely welcomed as evidence that the economy is regaining its footing. However, the reclassification, based primarily on gross national income per capita, should not be mistaken for proof that the country’s economic fundamentals have been fully repaired. Export growth remains modest, Government revenue continues to be weak by international standards, productivity gains have been limited, and many of the institutional reforms needed to sustain long-term growth remain unfinished.

The designation also carries potential costs. As countries move into higher income categories, access to highly concessional financing, including support from the World Bank’s International Development Association (IDA), can become more limited over time, increasing reliance on less concessional lending. For a country still recovering from sovereign default and navigating a difficult debt restructuring process, maintaining access to affordable development financing remains a significant consideration.

Recent history also serves as a warning. Sri Lanka was first elevated to Upper Middle-Income status in 2018, only to be downgraded the following year before plunging into an unprecedented economic collapse that culminated in sovereign default in 2022. It is therefore clear that income classification is not synonymous with economic resilience.

At the same time, inflation has begun to edge upwards once again. The Colombo Consumer Price Index (CCPI) recorded year-on-year inflation of 6.8% in June 2026, up from 5.5% in May and nearing the Central Bank of Sri Lanka’s (CBSL) upper target of 7%. The increase was driven by both food and non-food prices, signalling renewed pressure on household budgets and suggesting that price stability remains vulnerable despite the broader economic recovery.

Against this backdrop, the Government’s latest fuel price revision has offered motorists some welcome relief, with reductions in the prices of petrol 92 and auto diesel after months of increases. While the cuts are modest, they carry political significance, since the overall prices of fuel still remain quite high. 

For the AKD administration, however, the larger challenge extends beyond headline growth figures and periodic price reductions. Sustaining public confidence will depend on whether the Government can translate macroeconomic stabilisation into stronger exports, healthier public finances, lower inflation, and tangible improvements in living standards.

IMF’s timely reminder

Meanwhile, the IMF mission that was in Sri Lanka since late last month concluded its visit on Tuesday (30 June). The IMF’s latest message to Sri Lanka was clear, which was that external shocks may be unavoidable, but abandoning reforms is not.

Concluding staff-level discussions in Colombo, IMF Mission Chief for Sri Lanka Evan Papageorgiou urged the country to “stay the course and sustain the reform momentum,” stressing that while global crises came and went, long-term economic recovery depended on domestic policy choices.

His remarks come at a time when Sri Lanka is grappling with rising fuel prices triggered by tensions in the Middle East. The IMF has already shown flexibility by easing some programme targets under the $ 3 billion Extended Fund Facility (EFF), recognising that higher energy costs could slow growth. But the fund’s willingness to accommodate external pressures should not be interpreted as tolerance for reform delays.

While the Government has restored a measure of macroeconomic stability since the 2022 crisis, progress on structural reforms has been far less convincing. Long-promised restructuring of loss-making State-Owned Enterprises (SOEs), including SriLankan Airlines, the Ceylon Petroleum Corporation (CPC), and the Ceylon Electricity Board (CEB), which has now been unbundled into six companies, has slowed, despite these institutions remaining a significant burden on public finances.

This is where the real political challenge lies. Fiscal discipline and improved revenue collection have stabilised the economy, but lasting recovery will require tackling the structural weaknesses that successive governments have avoided for decades.

The IMF’s message therefore is ultimately a reminder that Sri Lanka’s future will be determined less by global events than by its willingness to complete the reforms it has already committed to. As a senior economist pointed out, external shocks may test the economy, but reform fatigue poses an even greater long-term risk.

Two reports, two versions

Meanwhile, the mystery surrounding millions of dollars that had been set aside by the Treasury for Sri Lanka’s sovereign debt repayments that had gone missing during the transaction has now become a key issue being probed by Parliament’s Committee on Public Finance (COPF).

The committee, chaired by Harsha de Silva, recently began examining how funds earmarked for servicing the country’s debt allegedly disappeared, receiving separate explanations from the Ministry of Finance and Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe.

The Finance Ministry had presented its account first. The CBSL, after reviewing the ministry’s submission, had followed with its own observations. Whether the two versions complement each other or expose conflicting accounts remains unclear, as the COPF has yet to publicly disclose its findings.

What is evident, however, is that the committee is far from concluding its inquiry. Members are expected to examine both submissions in detail before preparing a consolidated report to be tabled in Parliament, most probably this coming week.

That report is likely to intensify scrutiny over the management of public finances, raising fundamental questions about who was responsible for safeguarding the funds, whether adequate oversight existed, and how money reserved for repaying the nation’s debts allegedly went missing.

Anti-torture watchdog

The Government meanwhile has used the second visit of the United Nations (UN) Subcommittee on Prevention of Torture (SPT) to Sri Lanka to reinforce its message that the country is pursuing a policy of constructive engagement with international human rights mechanisms.

During the 10-day mission, which concluded on 24 June, the four-member UN delegation met Ministers Vijitha Herath and Harshana Nanayakkara, senior officials, the Human Rights Commission of Sri Lanka (HRCSL), and civil society representatives, while also visiting places of detention.

According to the Ministry of Foreign Affairs, the SPT has acknowledged Sri Lanka’s commitment to preventing torture, commended the Government for granting unhindered access to detention facilities, and appreciated the cooperation extended throughout the visit. Ministers, in turn, had reiterated the Government’s zero-tolerance policy on torture and highlighted ongoing legal and institutional reforms.

Beyond the routine engagement, the visit carries wider diplomatic significance. At a time when Sri Lanka is seeking to rebuild international confidence and project a more cooperative approach to human rights, the smooth conduct of the mission and the Government’s emphasis on transparency are likely to be viewed as important signals ahead of future engagement with UN human rights mechanisms. 

The SPT’s final recommendations, however, will provide the more substantive test of whether the Government’s stated commitments are matched by lasting institutional reforms.

Opposition’s full motion

While questions over the Judiciary continue to mount, the Opposition is preparing to escalate the matter inside Parliament through one of its strongest procedural mechanisms.

Opposition Members of Parliament (MPs) are expected to formally submit a substantive motion to the Speaker, seeking a full parliamentary debate on what they describe as the President’s constitutional and official responsibility for the prolonged failure to fill vacancies in the country’s superior courts, including the Supreme Court and the Court of Appeal. The motion, signed by Opposition legislators last week, is expected to be handed over when Parliament next convenes.

The move is significant because Standing Order 83(1) permits the conduct of the President or members of the Judiciary to be questioned only through a substantive motion supported by MPs, rather than by way of ordinary debate or statements. By invoking this procedure, the Opposition is signalling that it intends to frame the issue as one of constitutional accountability rather than political disagreement.

The motion presents three key demands. First, it calls on the Government to present Parliament with a comprehensive report detailing the existing vacancies in the Supreme Court and Court of Appeal, the dates on which each vacancy arose, the measures taken to fill them, and the reasons for the continued delays.

Second, it urges the Government to ensure the effective functioning of the Constitutional Council and recommends that the President immediately submit nominations for judicial appointments in accordance with Articles 107, 33(e), 41(b), and 41(c) of the Constitution, and complete the appointment process without further delay.

Third, the Opposition seeks a set of recommendations aimed at strengthening judicial independence, upholding the rule of law, and improving the administration of justice. It also proposes that the Government be required to report back to Parliament within one month on the progress made in addressing the vacancies.

Once formally presented to the Speaker, the motion is expected to be placed on the Parliament’s Order Paper, paving the way for a full debate on the President’s handling of judicial appointments and the constitutional implications of the prolonged vacancies in the country’s highest courts.

JVP lawyers meet

However, as the Opposition’s criticism has become so intense, its impact has reportedly been felt within the Government itself. It is learnt that the President had held a meeting recently with a group of lawyers affiliated exclusively with the JVP to discuss the proposal of increasing the retirement ages of judges of superior courts. The meeting had followed repeated requests by the JVP lawyers to the Party Headquarters in Pelawatte, seeking an opportunity to discuss the matter with the President.

The lawyers had specifically sought the meeting to express their opposition to the Government’s move to extend the retirement age of judges. Although many prominent JVP lawyers had voiced their objections within the party over a considerable period, they had refrained from expressing those views publicly.

During the discussion, the JVP lawyers had openly conveyed their opposition to the proposed extension of judges’ retirement age. In response, the President, it is learnt, had outlined several reasons that, according to him, had influenced the Government’s thinking on the matter.

The President had noted that the proposal was not intended to secure any political, electoral, or publicity advantage for the Government. However, during the discussion, he had posed a question to the lawyers – why were they opposed to such a proposal? Most of the lawyers had responded by arguing that extending judges’ tenure would disrupt the long-standing practice of allocating hearing dates for court cases.

The President is said to have replied with a smile: “But isn’t that a good thing? Instead of postponing cases for six months, seven months, or even a year, wouldn’t it be much better to hear them promptly and finish them quickly? That’s what the people of this country want, isn’t it? So, are you saying that’s not a good thing?”

The Geneva conundrum

Meanwhile, on the issues faced by the Government, it is learnt that a recent discussion on making some key changes in the Presidential Secretariat has been put on hold due to issues in finalising several diplomatic appointments.

It was earlier reported that Secretary to the President Nandika Sanath Kumanayake was to be appointed to a key diplomatic posting, with President’s Chief of Staff Prabath Chandrakeerthi tipped to take over the post of presidential secretary.

Although Chandrakeerthi was expected to assume duties as the new presidential secretary with effect from Wednesday (1), the appointment has been temporarily delayed due to complications surrounding several senior diplomatic postings, it is learnt.

The delay stems from both the incumbent Presidential Secretary and Ambassador to the US Mahinda Samarasinghe expressing interest in a key diplomatic posting in Geneva, creating a deadlock over the appointments.

Until a final decision is made with regard to the diplomatic postings in Geneva as well as the US, there will not be a change in the post of presidential secretary.

Scoring on crackdown

The Government nevertheless has managed to score points before the masses on its crackdown on underworld and organised crime operations.

When President AKD informed Parliament that 58 wanted fugitives, especially with alleged links to organised crime, had been repatriated since his administration took office in 2024, the announcement highlighted a renewed focus on pursuing suspects who had fled Sri Lanka. Yet the figures also underscored the scale of the challenge ahead. According to the Government, 95 Interpol Red Notices remain outstanding.

Behind those numbers lies a law enforcement effort that has extended beyond conventional extradition channels. Inspector General of Police (IGP) Priyantha Weerasooriya has acknowledged relying on direct relationships with foreign Police chiefs to secure the return of suspects from jurisdictions where formal Interpol procedures were insufficient or unavailable. Fourteen of the 58 repatriations were reportedly carried out through such Police-to-Police cooperation without the use of Interpol Red Notices.

Official records presented to Parliament also reveal stark differences in the performance of successive administrations. During the Yahapalana Government, eight high-profile alleged underworld figures – including Wele Suda, Kanjipani Imran, and Makandure Madush – were returned to Sri Lanka to face legal proceedings. By contrast, the subsequent Sri Lanka Podujana Peramuna (SLPP) administration has been criticised for recording no comparable high-profile extraditions.

Several cases have also raised broader questions about the effectiveness of the criminal justice system once suspects returned to Sri Lanka. Kanjipani Imran, for instance, was granted bail on 20 December 2022, and is reported to have left the country within days, allegedly travelling by boat from Talaimannar to Tamil Nadu. The sequence, from arrest to release and subsequent departure, has been cited by critics as an example of weaknesses extending beyond policing into the wider justice system.

A similar pattern had emerged in several other cases as well.

Against that backdrop, the current Government’s recent operations have drawn attention for their international reach. Authorities have announced the repatriation of Kehelbaddara Padme and four associates from Jakarta, the return of Loku Patty from Belarus, and the arrest of Batuwatte Chamara through a joint operation involving Azerbaijani security agencies. Each operation had required coordination between Sri Lankan authorities and foreign law enforcement counterparts, reflecting an increasing reliance on international policing networks.

The Government’s campaign to bring back suspects has therefore evolved into more than a series of arrests. It has also reopened long-standing questions about how organised criminal networks were able to establish operations overseas, evade capture for extended periods, and, in some instances, leave Sri Lanka even after entering the country’s judicial process.

Spotlight on Presidential Secretariat

Meanwhile, the arrest of a Senior Assistant Secretary at the Presidential Secretariat a few days after the arrest of former Justice Minister Wijeyadasa Rajapakshe’s son Rakitha Rajapakshe and former Organiser of the Samagi Jana Balawegaya (SJB) Charith Abeysinghe has laid bare an uncomfortable truth that the machinery of the State can be turned against the State itself. 

The official in question didn’t need to break into the Immigration system. He used to run part of it, serving as Deputy Controller at the Department of Immigration and Emigration’s Embassy Division, where forging an escape route for an organised crime figure was apparently well within reach. The suspect, named Dhanapala, is a 41-year-old resident of the Kandy area, currently serving as a Senior Assistant Secretary at the Presidential Secretariat.

The Presidential Secretariat sits at the apex of the country’s Executive administration. It is, in theory, where the business of governance is conducted with the highest standards of integrity. That a man allegedly helping an international-level criminal slip out of the country under a false identity was drawing a salary there is not merely an embarrassing footnote, but a structural alarm bell.

This special operation was reportedly carried out under the direct supervision of Senior Deputy Inspector General (SDIG) Ranmal Kodithuwakku, Deputy Inspector General (DIG) Chandana Kodithuwakku, and Central Crime Investigation Bureau (CCIB) Director, Senior Superintendent of Police (SSP) Kamal Ariyawansa. The CCIB’s investigation suggests this was no impulsive act. It was a transaction, carefully arranged, exploiting official access accumulated over years of public service.

Wijeyadasa’s views

Former Justice Minister Wijeyadasa Rajapakshe has meanwhile, for the first time, spoken to several of his close associates about the recent remanding of his son, Rakitha, and Abeysinghe.

Rajapakshe has alleged that the audio clips (voice cuts) circulating on social media are fabricated and have been maliciously edited in Malaysia and that the full extent of the alleged conspiracy behind them will be revealed to the country in due course.

He has expressed suspicion that the arrests were politically motivated and intended to divert public attention from the Government’s failures and other serious issues facing the country.

Rajapakshe had also questioned how such a large sum of money could have been illegally brought into Sri Lanka from Dubai without being detected at the Bandaranaike International Airport (BIA), arguing that this raised serious questions about the authorities’ version of events.

While stating this, Rajapakshe had also noted that as a father, it would not be ethically appropriate for him to appear in court on behalf of his son, and revealed that around 150 senior lawyers had voluntarily expressed their willingness to represent both Rakitha and Abeysinghe in the legal proceedings.

RW visits Wijeyadasa

Meanwhile, former President Ranil Wickremesinghe had visited Rajapakshe at his residence recently to inquire into his well-being and that of his family. During this visit, Wickremesinghe had given a detailed explanation of how the detention order for Harak Kata had been lawfully issued when he (Wickremesinghe) was serving as the Minister of Defence.

The meeting was also attended by President’s Counsel Ronald Perera and SJB MP Kavinda Jayawardana.

Wickremesinghe had emphasised that the legal authority to issue Detention Orders rested solely with the Minister of Defence and not with the President’s Office. “At the time, I was the Defence Minister and I signed the Detention Order myself. Once a request came from the Inspector General of Police, the Defence Secretary reviewed it and forwarded it to me. Officials in my office checked for any procedural deficiencies, after which I signed it and sent it back. There was absolutely no opportunity for Wijeyadasa or anyone else to interfere in this process.”

It had also been discussed that certain groups were attempting to portray as wrongdoing the fact that Rajapakshe had written a letter requesting that the suspect known as Harak Kata be provided with adequate security. It is learnt that during the discussion, it had been pointed out that ensuring the safety of any suspect held in State or Police custody was a responsibility of the Government.

Following Wickremesinghe’s visit, Joint Opposition Convenor G.L. Peiris had also visited Rajapakshe.

Questioning SDIG

Meanwhile, the Police has also turned to questioning their own, with Eastern Province SDIG Varuna Jayasundara being summoned before the Criminal Investigation Department (CID) on Thursday (2) to record a statement over allegations linking him to alleged organised crime figure Kehelbaddara Padme.

Police sources said Jayasundara had been summoned as part of an ongoing investigation into his alleged associations with the organised criminal network.

Joint Opposition programmes

Amidst all these developments on the ongoing crackdown of the underworld and organised crime, the political scene, especially in the Opposition, continues to focus on anti-Government campaigns.

The Joint Opposition group convened by former Minister Peiris has organised several events this coming week.

A gathering of lawyers representing Opposition parties are to hold a meeting at the Amari hotel in Colombo on Thursday (9). The lawyers’ meeting is to focus on the current issues faced by the Judiciary, including the move to increase the retirement age of judges.

After the lawyers’ meeting, the Joint Opposition leaders are to travel to Kurunegala during the weekend to attend the next in the series of anti-Government seminars in the city next Sunday (12).

Meanwhile, activists linked to the Citizens’ Struggle Movement staged a protest in Colombo on Wednesday (1), calling on the Government to take urgent action over the rising cost of living.

Demonstrators gathered in the Rajagiriya area chanting slogans, including “AKD go home,” as they demanded immediate relief from increasing prices of essential goods such as rice, vegetables, and other daily necessities.

Protesters accused the Government of failing to deliver on its promises of economic relief, saying that the burden of the cost of living continued to weigh heavily on ordinary citizens.

Implicating GR and RW

Meanwhile, the remand of former President Gotabaya Rajapaksa’s (GR) former Private Secretary Sugeeshwara Bandara over allegations of receiving dual salaries has quickly evolved into something larger than a routine corruption inquiry. With the Colombo Fort Magistrate’s Court postponing the bail order until Wednesday (8), the case now focuses on the intersection of two administrations and two narratives of governance failure.

Investigators have placed before court a statement attributed to former President GR, alongside claims of broader misuse of public funds during the subsequent Wickremesinghe administration, including allegations of irregular expenditure running into hundreds of millions of rupees under a ‘Special Projects’ structure that allegedly had little or no defined State function.

The defence, however, has insisted that the case is being built on weak procedural ground, arguing that key administrative decisions, ranging from recruitment to resource allocation, had been taken at the level of the Presidential Secretariat, not by the accused officer himself.

NDF Gen. Sec.’s arrest

Meanwhile, former Chairperson of the National Lotteries Board (NLB) Shyamila Perera, who is also the General Secretary of the New Democratic Front (‘gas cylinder’ party) that has several MPs in the House – including Ravi Karunanayake and Faiszer Musthapha – was arrested by the Commission to Investigate Allegations of Bribery or Corruption (CIABOC) over allegations involving the misuse of public sector employees.

According to reports, Perera is accused of facilitating the deployment of three individuals recruited to the NLB between 2015 and 2019 to serve in the staff of then Minister Karunanayake, instead of performing duties at the State institution.

Perera was granted bail the same evening and a travel ban was imposed on her while the CIABOC is continuing its investigations into the matter.

Probing ex-ministers’ kids

Meanwhile, several investigative bodies, including the CIABOC and the CID, it is learnt, have launched investigations into 10 sons of former ministers who are facing allegations of bribery, corruption, and various irregularities.

A senior Police officer has noted that investigations are also underway into several sons of ministers who had alleged ties to the criminal underworld. Measures have also been taken to prevent these individuals from fleeing the country.

Three sons of former ministers and politicians, who are facing accusations of various forms of corruption and underworld connections, have already been arrested. Among those recently taken into custody is Rakitha Rajapakshe in connection with a bribery charge.

Investigations have revealed that many of these ministers’ sons had engaged in various corrupt activities and irregularities during previous governments, exploiting the influence of their fathers. CID sources indicated that in some cases, the former minister fathers had directly assisted in these activities, and statements are expected to be recorded from those former ministers as well.

Further arrests are expected once additional evidence has been gathered, according to sources.

It is said that most of these ministers’ sons had committed their alleged acts of corruption while holding various positions they had obtained through the patronage of their fathers during those governments.

Additionally, the CIABOC says that investigations have also been launched into several relatives of former ministers facing various corruption allegations.

Probe on ex-Prez’s son

The CID, meanwhile, has reportedly launched a special investigation into an alleged Customs duty evasion scheme involving the son of a former President, who is accused of smuggling luxury vehicles worth hundreds of millions of rupees into Sri Lanka.

According to informed sources, the operation is believed to have taken place during previous administrations. Investigators have already uncovered information on several luxury vehicles that were allegedly brought into the country concealed in shipping containers as part of an organised smuggling network.

The investigation has also found that some of the vehicles are reportedly being used by children of prominent political figures, with the CID now examining their involvement.

Preliminary findings have further suggested that the vehicles allegedly smuggled into the country had been registered with the assistance of corrupt officials at the Department of Motor Traffic.

In one case, investigators have found that the registered owner, who is said to be a son of a politician, had subsequently paid the applicable Customs duties after the vehicle had already been registered. Information has also emerged suggesting that, instead of confiscating such illegally imported vehicles, authorities may have allowed owners to regularise them by paying the outstanding duties.

The CID has also seized another vehicle linked to the alleged scheme. The vehicle was taken into custody shortly before the change of government, and the individual in possession of it had reportedly claimed that it belonged to the son of a former President.

The vehicle was subsequently handed over to Sri Lanka Customs and remains in its custody. Sources have said that the current Government has prevented any attempt to secure its release by paying the relevant duties. The son of the former President is expected to be summoned by the CID for questioning as investigations continue.

Justice delayed, reform deferred

Be that as it may, a Supreme Court Justice recently revealed that Sri Lanka’s justice system is facing a crisis that can no longer be dismissed as mere inefficiency. Supreme Court Justice Yasantha Kodagoda has revealed that completing a single cycle of a criminal case takes an average of 10 years and two months, while 1.1 million cases remain pending before just 333 courts.

The numbers speak for themselves. If a burglary is reported today, Justice Kodagoda has noted, the first phase of the case would not conclude until August 2036. That timeline is not simply a bureaucratic problem, it raises serious questions about access to justice, public confidence in the courts, and the State’s ability to uphold the rule of law.

Successive governments have promised judicial reform, yet court backlogs continue to grow while shortages of judges, prosecutors, and court staff persist. As policymakers debate constitutional and political change, the basic functioning of the justice system remains one of the country’s most pressing institutional challenges.

Justice delayed has long been described as justice denied. Sri Lanka’s courts are now confronting a reality where that warning has become an everyday experience.