Thursday Oct 01, 2026
Thursday Oct 01, 2026
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CBSL Governor Dr. Nandalal Weerasinghe – Pic by Upul Abayasekara
Sri Lanka will keep its inflation target at 5%, with a band of 2 percentage points on either side, for the next three years, Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe said yesterday. The Government has accepted the CBSL’s recommendation.
Speaking at the media briefing to announce the latest monetary policy decision, Dr. Weerasinghe said the Government would soon announce the decision through a Gazette Notification. The current target was agreed with the Finance Minister under the Monetary Policy Framework Agreement in October 2023. The framework is backed by the Central Bank of Sri Lanka Act of 2023, which requires the target to be reviewed every three years.
The CBSL sent its recommendation to the Finance Minister before the International Monetary Fund (IMF) set out its view on the target last week, he said.
At the end of its staff visit on 23 September, the IMF recommended that Sri Lanka keep the 5% target and the existing accountability band at the first statutory review.
IMF Mission Chief for Sri Lanka Evan Papageorgiou said the current target gives Sri Lanka the flexibility it needs given volatile food and energy prices, and that a move towards a lower target could be considered at the next review once a record of low and stable inflation is established. The recommendation came amid growing calls from some Government officials and independent economists for a lower target, with some advocating around 2%.
“The IMF has one view. Other local experts have different views. Some politicians have other views. Our recommendation is based on pure technical and empirical analysis of the country’s situation and what the best inflation target for the next three years is,” Dr. Weerasinghe said.
He said it was too early to predict what the target would be beyond the three-year period.
Dr. Weerasinghe also said he expects Sri Lanka to reach a staff-level agreement with the IMF on the Seventh Review of its Extended Fund Facility (EFF) shortly. An IMF team recently ended a visit to the country. He said the delay stemmed from technical and analytical work on certain aspects, much of which the Government has already done.
“I would expect the staff-level agreement to be reached very soon. It won’t take much longer,” he said.
He said Sri Lanka will receive the disbursement tied to the review by the end of this year.
On whether Sri Lanka needs another IMF program after the current EFF expires in March 2027, Dr. Weerasinghe said the decision rests with the Government, which will make it at the appropriate time.
