IMF urges retaining 5% inflation target

Thursday, 24 September 2026 00:28 - - {{hitsCtrl.values.hits}}

Says current target preserves flexibility amid food and energy price volatility
Lower target could be considered at next review, once track record of low, stable inflation is established

The International Monetary Fund (IMF) yesterday recommended that Sri Lanka retain its 5% inflation target and current accountability band at the first statutory review of the target. The recommendation comes amid growing calls from some Government officials and independent economists for a lower target.

IMF Mission Chief for Sri Lanka Evan Papageorgiou said the current target preserves the flexibility Sri Lanka needs amid high food and energy price volatility. “Once a track record of low and stable inflation is established, convergence towards a lower target could be considered at the next review,” he said.

Sri Lanka set the 5% target in October 2023 under the flexible inflation-targeting framework backed by the Central Bank of Sri Lanka Act of 2023, which provides for the target to be reviewed every three years, with the first review expected in late 2026. The target is set under a three-year agreement between the Central Bank of Sri Lanka (CBSL) and the Finance Ministry, which came to an end in August.

There are growing calls for the inflation target to be reduced. CBSL Governor Dr. Nandalal Weerasinghe has warned that reducing the target to 2% would require the CBSL to tighten monetary policy sharply and raise interest rates, which would not support growth. He said the CBSL consults the Finance Ministry and the Government on the desired rate of growth, and that a 5% growth goal alongside a 2% inflation target would not be consistent.