The Central Bank of Sri Lanka left its overnight policy rate unchanged at 8.75% in September 2026 for a second consecutive meeting, in line with market expectations. The decision reflects the Bank’s assessment that the proactive monetary tightening implemented in May is still working its way through the economy. Policymakers also pointed to elevated uncertainty stemming from tensions in the Middle East and potential El Niño–related risks.
Headline inflation accelerated to a three-year high of 8% in August, driven primarily by an energy-price shock that has pushed up fuel costs in the oil-importing economy. Inflation is expected to remain in the high single digits through the first quarter of 2027 before gradually moving closer to the Central Bank’s 5% target.
On the activity side, the economy expanded by 4.7% in the first half of 2026. While private-sector credit growth has moderated, it is still considered adequate to support economic activity. Externally, the current account is estimated to have returned to surplus in August after four consecutive months of deficits, helped by subdued imports, resilient tourism inflows, and workers’ remittances. Gross official reserves rose to USD 6.9 billion as of end-August.
