Sri Lanka Central Bank Strengthens Policy Outlook Amid Global Risks

The Central Bank of Sri Lanka (CBSL) has announced readiness to implement appropriate policy measures to ensure inflation stabilizes near its target. Despite external challenges, particularly from ongoing Middle East conflicts, the bank emphasized resilience in reserves and a faster-than-expected path to price stability.

Policy Commitment
CBSL reiterated its focus on maintaining inflation around the 5% target, underscoring proactive monetary strategies. The bank’s stance reflects confidence in domestic stabilization efforts while remaining vigilant against global uncertainties.

External Sector Risks
The central bank cautioned that geopolitical tensions in the Middle East could weigh on Sri Lanka’s external sector outlook, potentially impacting trade and capital flows. Policymakers remain alert to evolving risks that may affect balance of payments stability.

Reserves And Inflation Outlook
Gross official reserves rose to $7.3 billion by end-February 2026, strengthening external buffers. Inflation is now expected to reach the 5% target in Q2 2026, earlier than anticipated, signaling improved macroeconomic management.

Key Highlights

• Sri Lanka central bank prepared to act on inflation
• Reserves increased to $7.3 billion by February 2026
• Inflation expected to reach 5% target in Q2 2026
• Middle East conflict poses external sector risks

Sources: Reuters, Sri Lanka Central Bank statements