The Monetary Policy Board has decided to maintain the Overnight Policy Rate (OPR) at 7.75% following its meeting yesterday, after careful consideration of both domestic and global developments. The Board noted that the current monetary policy stance is appropriate to guide inflation towards the 5% target.
Headline inflation, measured by the Colombo Consumer Price Index (CCPI), turned positive in August 2025, ending an eleven-month period of deflation. Inflation is projected to gradually rise towards the 5% target by mid-2026. Core inflation is also expected to increase in line with strengthening domestic demand and stabilize around the headline inflation target, with medium-term inflation expectations remaining anchored.
Sri Lanka’s economy is estimated to have grown by 4.8% in the first half of 2025, with leading indicators pointing to continued momentum into the third quarter. Credit to the private sector has expanded broadly, supported by a low-interest-rate environment and a recovery in economic activity. This growth in private sector credit is expected to further support domestic economic activity in the coming months.
The external sector remains resilient, aided by improved inflows from tourism and workers’ remittances, despite a widening trade deficit. Net foreign exchange purchases by the Central Bank have helped maintain gross official reserves at USD 6.2 billion by the end of August, despite ongoing debt service payments. The Sri Lankan rupee has remained broadly stable. All three major rating agencies have upgraded Sri Lanka’s sovereign ratings, reflecting the country’s improved credit standing.
