Sri Lanka’s economy is likely to experience stronger growth than initially projected in 2026, Central Bank Governor Dr. Nandalal Weerasinghe said, citing increased government spending for post-cyclone reconstruction.
Speaking on a television program about the country’s economic outlook, Dr. Weerasinghe noted that earlier projections had estimated growth between 4–5%, but additional stimulus from reconstruction efforts could push growth higher if funds are spent efficiently and without delay.
Economic growth in 2025 had already exceeded expectations, approaching 5% by the third quarter. The full impact of Cyclone Ditva in the fourth quarter is still being assessed, but final figures are likely close to this level.
“Before the cyclone, our growth projections were 4–5%. Now, with reconstruction and recovery spending, economic activity could pick up in 2026,” Weerasinghe said.
The government has allocated Rs. 1.4 trillion for public investment in 2026 and plans to add Rs. 500 billion specifically for cyclone recovery. The governor said this spending, particularly in the construction and related sectors, could further stimulate growth.
However, he cautioned that higher demand for goods, services, and labor could lead to upward pressure on inflation, which is expected to rise from around 2% to 5% by the third quarter of 2026.
Dr. Weerasinghe also highlighted potential challenges for foreign exchange reserves, as increased imports for construction materials and fuel could strain the trade balance. He stressed the need to boost foreign earnings through exports, tourism, and external financing such as loans and grants.
While the overall outlook points to strong growth potential, the governor emphasized that the actual outcome will depend on how efficiently and quickly recovery spending is implemented.
