Improving macroeconomy gives Group ‘more stable operating backdrop’: JKH Chairperson

Krishan Balendra

• Cautions pass-through of stability to the wider economy is uneven; consumer demand seen improving while discretionary spending remains measured

Improving macroeconomic conditions have given John Keells Holdings PLC (JKH) a firmer footing for the quarters ahead, the conglomerate’s Chairperson Krishan Balendra told shareholders, pointing to stronger growth, rebuilt reserves and an upgraded sovereign credit rating as the base for the group’s operating environment.

In the statement accompanying the group’s interim results (https://www.ft.lk/top-story/JKH-2Q-PBT-up-2-to-Rs-7-95-b-attributable-profit-soars-213/26-799569), Balendra attributed the improvement squarely to reform. “Sri Lanka’s macroeconomic environment remained stable during the period under review, notwithstanding the volatile global external environment, reflecting the progress achieved from economic reforms and prudent policy management over the past several years,” he said.

“The economy continued its growth trajectory, with real GDP recording year-on-year growth of 4.2% in the second quarter of calendar year 2026, whilst gross official reserves remained resilient at approximately $ 6.9 billion as at end-September 2026.”

Fiscal performance also strengthened, with the Government recording surpluses on both the primary and budget balances as of August 2026, supported by revenue mobilisation, efforts to broaden the tax base and disciplined expenditure management.

Balendra flagged the upgrade of Sri Lanka’s sovereign credit rating by Fitch Ratings to ‘B-’ from ‘CCC+’ during the quarter as a turning point. “During the quarter, Sri Lanka’s sovereign credit rating was upgraded by Fitch Ratings to ‘B-’ from ‘CCC+’, a significant milestone that reflects the progress achieved in restoring macroeconomic stability,” he said.

The Seventh Review of the International Monetary Fund’s Extended Fund Facility concluded successfully with a staff-level agreement, with the next disbursement expected to be approved by the IMF Executive Board in November 2026.

Balendra drew a direct link between the macro recovery and business confidence. “Together with the continued strengthening of external sector fundamentals, these developments have enhanced confidence in the country’s economic outlook and provided a more stable foundation for growth.”

The Chairperson was careful to qualify the base case, warning that developments in the Middle East continued to weigh on the business environment, with higher global energy prices feeding inflation, compounded by the low base effect of last year’s deflationary conditions. “Higher fuel, energy and imported commodity prices consequently created input cost pressures across a broad range of industries and businesses,” he said.

The rupee, which came under pressure in the first quarter amid heightened external volatility, subsequently stabilised, while domestic interest rates remained broadly stable.

Consumer demand continued to improve, though Balendra said discretionary spending held back in parts of the market. “Consumer demand continued to improve, although discretionary spending remained measured across certain segments.”

He described the pass-through of stability to the wider economy as uneven. “Whilst macroeconomic conditions have improved considerably, the benefits of this stability, and resultant consumer confidence, are continuing to filter through the broader economy at varying rates.”

Tourism held up despite geopolitical uncertainty and disruption to regional air connectivity. Sri Lanka welcomed approximately 1.69 million visitors in the first nine months of 2026, a marginal decline of about 2% year-on-year, though arrivals as at 29 October were some 3% ahead of the corresponding period last year. Forward bookings across the group’s hotels in Sri Lanka and the Maldives for the winter season remain strong, provided connectivity through key regional transit hubs remains largely uninterrupted.

“Overall, the continued improving macroeconomic environment provides a more stable operating backdrop for the Group, notwithstanding continued external uncertainties and varying demand conditions across sectors,” Balendra said.