Overnight Policy Rate Increased to 8.75%; Inflation Rises to 5.4%
28-May-2026.
The Central Bank of Sri Lanka has decided to increase the Overnight Policy Rate to 8.75 percent in order to maintain economic stability and control demand pressures amid recent domestic and global developments.
Central Bank Governor Nandalal Weerasinghe nevertheless stressed that despite the impact of Middle Eastern tensions since late February, the country’s current economic condition remains significantly better than during the 2022 economic crisis.
The decisions were announced at a media briefing held on May 26 following the third Monetary Board meeting of the year.
The Governor stated that the Overnight Policy Rate had been increased by 100 basis points to 8.75 percent, while the Statutory Reserve Ratio would remain unchanged at 2 percent.
He noted that inflation, which stood at 2.2 percent in March, had risen to 5.4 percent in April. The increase was mainly attributed to rising global oil prices due to Middle Eastern conflicts and the subsequent increase in domestic fuel prices.
Tourism revenue also declined from USD 1.379 billion recorded between January and April last year to USD 1.111 billion during the same period this year.
However, foreign remittances increased from USD 2.5 billion to USD 3.1 billion during the corresponding period, while gross official reserves stood at USD 6.8 billion during the first quarter of the year.
The Governor stated that although the economy continues to face external pressures, current conditions remain far healthier than during the 2022 crisis, with inflation and exchange rates remaining relatively stable.
Regarding economic growth, he noted that the Central Bank had earlier forecast growth of 4 to 5 percent for the year, although fresh estimates had not yet been made in light of current developments.
On IMF conditions, he said the IMF Executive Board was scheduled to meet to consider approval relating to the fifth and sixth reviews under the Extended Fund Facility programme.
He further explained that recent external pressures had necessitated tighter demand management measures, including higher interest rates and credit limits on vehicle imports.
The Governor also announced that the Central Bank would launch a nationwide awareness campaign next month under the theme “Preventing Financial Fraud”, using seminars, leaflets and other public education initiatives.
