CBSL Chief Signals Stability Despite Global Pressures and Currency Adjustments

COLOMBO (News 1st); Sri Lanka’s economy is continuing on a steady growth trajectory, with expansion in the first half of 2026 aligning closely with the approximately 5 percent trend recorded over the past two years, according to Central Bank Governor Dr. P. Nandalal Weerasinghe.

Providing an update on the country’s economic outlook, the Governor noted that both the first and second quarters of the year have shown sustained growth, indicating ongoing recovery and resilience following the severe economic crisis of 2022.

He emphasised that the current economic position is significantly stronger compared to that period, particularly in terms of foreign exchange reserves and inflation, both of which are now at more stable and manageable levels. Fiscal conditions have also improved, with the government maintaining healthier indicators and building buffers to withstand potential external shocks.

Dr. Weerasinghe pointed out that key sectors, including the external, monetary, and fiscal fronts, had been moving in the right direction before recent global developments, particularly tensions in the Middle East, began exerting pressure on the economy. He noted that such external shocks inevitably require adjustments, not just in Sri Lanka but across all economies facing similar situations.

The impact of these pressures has already been reflected in moderate shifts, including inflation rising from around 2 percent to approximately 5 percent and some depreciation pressure on the national currency. However, the Governor stressed that these adjustments are part of a normal economic response to external shocks rather than signs of instability.

To manage these challenges, the Central Bank has implemented a series of policy measures, including adjustments to policy interest rates, aimed at maintaining overall macroeconomic stability and price stability. These measures are designed to ensure a balanced approach, supporting growth while preventing excessive demand that could lead to overheating and renewed inflationary pressure.

Dr. Weerasinghe explained that controlling excess demand, particularly in the context of increased import and foreign exchange requirements, is critical to safeguarding stability. He clarified that these steps are not intended to contract the economy but to moderate its pace in a sustainable manner.

He also highlighted that recent interventions have already contributed to stabilising the currency and improving market conditions, expressing confidence that these trends will continue in the coming quarters.

Looking ahead, the Governor projected that Sri Lanka would maintain reasonable growth over the next two quarters, supported by ongoing policy measures and improved economic fundamentals. He noted that the Central Bank remains equipped with additional tools to respond to any emerging imbalances, should they arise.

The overarching goal, he said, is to preserve macroeconomic stability while ensuring that inflation remains within target levels, even amid global uncertainties.