Sri Lanka central bank holds rates steady ahead of budget, IMF review

COLOMBO: Sri Lanka’s central bank kept its overnight policy rate unchanged on Wednesday, as it aims to underpin growth ahead of the country’s budget and a visit by a delegation of the International Monetary Fund for its latest review.

The Central Bank of Sri Lanka (CBSL) held the overnight policy rate at 7.75%.

Sri Lanka’s GDP is estimated to have expanded an annual 4.8% in the first six months of 2025 and inflation is projected to reach the central bank’s target of 5% by the middle of next year, the statement said.

“Medium term inflation expectations remain anchored around the inflation target,” the statement added. The monetary board’s decision was widely expected by markets as inflation, which reached 1.2% year-on-year in August, remains well below the central bank’s target of 5% and second quarter growth was 4.9%, in line with economists’ expectations.

The economy is expected to grow 4.5% in 2025.

“Another policy cut this year depends on the playoff created by the cut in US rates, potential global volatilities that influence energy prices, alongside what levels of inflation Sri Lanka will realize in the next few months,” said Anjali Hewapathage, deputy head of macroeconomic research at Frontier Research.

The last CBSL policy meeting for this year will be held on Nov. 25.

The central bank trimmed its benchmark interest rate by 25 basis points in May in a surprise move to support growth.

President Anura Kumara Dissanayake, who also serves as finance minister, will present the 2026 budget on November 7, which is expected to outline plans for record capital expenditure. A delegation of the IMF will be in Colombo to conduct a fifth review.

Sri Lanka completed a $22.5 billion debt rework last December with bilateral creditors and bondholders after defaulting on its foreign debt at the height of the crisis in May 2022.