March 09, Colombo (LNW): Sri Lanka is now in a stronger position to cope with fluctuations in global oil prices compared with the situation during its recent economic crisis, according to Central Bank Governor Dr. Nandalal Weerasinghe.
Speaking in a televised interview with Bloomberg, the governor said the country’s current economic stability provides a degree of protection against external pressures, including the recent surge in international petroleum prices. He noted that inflation presently stands at around 1.6 per cent, significantly below the Central Bank’s medium-term target of 5 per cent.
Dr. Weerasinghe explained that while rising energy prices can still influence inflation and put pressure on the country’s balance of payments, Sri Lanka now possesses far stronger financial safeguards than it did during the severe economic turmoil of 2022 and 2023. At the height of that crisis, inflation had surged to nearly 70 per cent, severely affecting households and businesses.
One of the key improvements, he said, is the recovery in the country’s external reserves. Foreign exchange reserves have climbed to more than seven billion US dollars, compared with the near-depleted levels experienced during the height of the crisis. These reserves, he added, serve as an important buffer in the event of global economic shocks.
The governor also highlighted the Central Bank’s inflation-targeting framework, which allows the exchange rate to adjust according to market conditions. This flexibility helps absorb external shocks by moderating demand and easing cost pressures within the economy.
However, Dr. Weerasinghe warned that prolonged geopolitical instability could still present risks. Ongoing tensions in the Middle East, for instance, may drive global energy prices higher and disrupt sectors such as tourism, international shipping and supply chains that are vital to Sri Lanka’s economic recovery.
He stressed that maintaining economic resilience will require continued efforts to strengthen fiscal discipline, monetary policy and external sector management. Building additional financial buffers, he said, remains essential to ensure the country can withstand future global uncertainties while safeguarding its economic stability.