November 27, Colombo (LNW): Sri Lanka is likely to record its highest level of foreign reserves since the onset of the economic crisis, with fresh funding from the IMF and ADB expected before the end of December, Central Bank Governor Dr Nandalal Weerasinghe told participants at the November 2025 Monetary Policy Review held in Colombo yesterday (26).
Dr Weerasinghe explained that the exchange rate continues to respond to market behaviour, stressing that fluctuations reflect underlying demand for foreign currency. He noted, however, that healthy inflows from tourism, worker remittances and export earnings are helping to maintain stability.
According to him, the recent ups and downs of the rupee indicate a market adjusting in a largely orderly manner. He also remarked that pressure on vehicle imports appears to be easing, with letters of credit retreating in November after a surge between July and September.
Turning to domestic credit conditions, the Governor said that lending to the private sector remains below its long-term trend when measured against GDP, leaving space for responsible credit expansion. He added that fiscal management in 2025 has outperformed previous years, and projected that the current account surplus will settle at close to 1 per cent of GDP—roughly one billion dollars.
The Monetary Policy Board, after reviewing global and local developments, opted to keep the Overnight Policy Rate unchanged at 7.75 per cent. The Board believes this stance remains appropriate to guide inflation towards the 5 per cent target. Consumer prices, measured by the Colombo Consumer Price Index, continued their upward path in October, though the rise has been less steep than previously anticipated.
Officials expect inflation to ease towards the target by the second half of 2026, with core inflation likely to pick up only moderately as economic demand strengthens.
Indicators point to continued economic recovery, with private sector credit showing broad-based growth throughout 2025, partly due to improved confidence and resumed demand for imported vehicles. Although the trade deficit has widened with higher import volumes, strong earnings from tourism and remittances have helped offset the imbalance.
Gross official reserves have remained above USD 6 billion this year, supported by the Central Bank’s net purchases of foreign currency. Additional inflows from multilateral lenders are anticipated in December.
Dr Weerasinghe noted that recent downward pressure on the rupee has begun to ease as foreign exchange liquidity improves. The Central Bank, he added, will continue to monitor economic conditions carefully and adjust its policy approach if required.
