Central Bank Governor Dr. Nandalal Weerasinghe says Sri Lanka is now in a much stronger position to withstand global economic shocks, including rising oil prices and geopolitical tensions in the Middle East.
Speaking in a recent interview with Bloomberg, the Governor noted that the country has built significant financial buffers, including foreign reserves that have increased from near-zero levels during the economic crisis to more than $7 billion.
He said this improvement provides an important safeguard against the impact of rising oil prices and potential supply chain disruptions triggered by tensions in the Middle East.
Dr. Weerasinghe also highlighted the significant improvement in the country’s inflation environment, which has fallen from a peak of nearly 70 percent during the crisis to about 1.6 percent at present.
According to the Governor, the low inflation rate gives the Central Bank considerable room to manage external price shocks without destabilizing the local economy.
He explained that unlike during the previous crisis—when fuel shortages occurred due to a severe shortage of foreign exchange—any current risks are more related to global supply logistics rather than a lack of domestic financial capacity.
Dr. Weerasinghe added that the exchange rate will be allowed to function as a shock absorber to manage demand and safeguard the country’s fiscal stability.
Addressing Sri Lanka’s ongoing program with the International Monetary Fund (IMF), the Governor confirmed that the December review was delayed due to the impact of recent cyclones and climate-related disruptions. However, negotiations are expected to resume around March 15.
The government aims to obtain approval from the IMF Executive Board by May 2026 in order to secure the next tranche of financial support.
He stressed that the IMF program remains a key pillar of economic stability and noted that the framework includes sufficient flexibility to adjust targets in response to global economic conditions and domestic challenges such as natural disasters.
Despite ongoing global uncertainties, Dr. Weerasinghe expressed optimism about Sri Lanka’s economic outlook, projecting GDP growth of nearly 5 percent for the year, which would exceed the IMF’s earlier estimate of around 2 percent.
However, he cautioned that the duration of the conflict in the Middle East remains a key concern. If disruptions continue for more than four to five weeks, the effects on global trade routes and supply chains could intensify.
For now, the Governor maintained that Sri Lanka possesses the necessary monetary and fiscal buffers to ensure that the country’s economic recovery remains stable and manageable.
