COLOMBO, Jan. 8 (Xinhua) -- Sri Lanka's economy is expected to grow by around 4 to 5 percent in 2026, supported by low inflation, improved foreign exchange reserves, and strengthened macroeconomic buffers, the Central Bank of Sri Lanka (CBSL) announced Thursday.
Presenting the Central Bank's policy agenda for 2026 and beyond, Nandalal Weerasinghe, governor of the CBSL, said real economic activity maintained its growth momentum in 2025 despite global trade uncertainty, financial market volatility, geopolitical tensions, and domestic climate-related shocks.
He said inflation remained subdued in 2025, allowing the Central Bank to maintain an accommodative monetary policy stance. Under Sri Lanka's flexible inflation targeting framework, the official inflation target remains at 5 percent.
The governor said inflation is expected to gradually rise during 2026 and return to the target by the second half of the year. He noted that both upside and downside risks remain, particularly from supply disruptions and reconstruction-related demand following Cyclone Ditwah.
Gross official reserves increased to over 6.8 billion U.S. dollars by the end of 2025, the highest level since the economic crisis.
He attributed the increase to net foreign exchange purchases of about 2 billion U.S. dollars by the Central Bank during 2025, in addition to inflows from multilateral agencies.
Weerasinghe said the Central Bank will continue to build reserves through market purchases while allowing exchange rate flexibility, in line with reserve adequacy requirements. ■
