The governor of Sri Lanka's central bank expects inflation to slow back to its 5% target in the second half of this year and into next, while forecasting economic growth to slow to 4%-5% amid the risks of war.
On August 17, 2026 at 8:37 AM, Bloomberg News reported that Sri Lanka's inflation is expected to slow back to the central bank's target of 5% in the second half of this year and continue into next year, according to Nandalal Weersinghe, Governor of the Central Bank of Sri Lanka.
“We are now seeing a stable situation, which is partly a result of the monetary policy measures we implemented in May and some of the measures the government has taken to control imports,” Weerasinghe said in an interview in Sydney, Australia, where he was part of a Sri Lankan delegation traveling to attract investors to the Colombo Stock Exchange.
In May, the central bank raised its policy interest rate by a full basis point to curb demand for credit after soaring global energy prices fueled inflation and pressured local currencies. The central bank then kept its overnight rate unchanged at its July meeting, even as prices continued to accelerate, as it attempted to balance price stability with economic growth.
“If oil prices remain around $80 per barrel until the end of this year, we can manage the situation. If unexpected things happen, of course we will face the challenges,” Weerasinghe said.
Although the protracted conflict between the US and Iran creates uncertainty in the global economic outlook, these comments indicate that the Central Bank of Sri Lanka is confident that tighter financial conditions and higher prices “will not have a significant negative impact” on growth, according to Wirasinghe, who expects the economy to slow in the second half of the year to around 4%-5%.
Sri Lanka's economy has faced several shocks in recent years, with an unprecedented default on its sovereign debt in 2565 forcing the government into a loan program backed by the International Monetary Fund (IMF), followed by a cyclone late last year, and now it is reeling from war.
Wirasinghe said Sri Lanka expects to “complete the four-year IMF program” in the second half of 2027, with the next review scheduled for around November or December of this year.
Reference: bloomberg.com
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