Sri Lanka’s central bank is anticipated to maintain its key interest rate at 7.75% on Wednesday, according to a recent Reuters poll. This decision coincides with an International Monetary Fund (IMF) delegation’s review of the sixth tranche of a vital $2.9 billion package.
The survey, which included a dozen economists, unanimously predicted no change to the benchmark overnight policy rate. Economists cited stable inflation, robust credit growth, and consistent economic expansion as key reasons for this expectation.
The Central Bank of Sri Lanka has kept the rates unchanged since May of the previous year, as the nation continues to recover from a 2022 financial crisis caused by a severe shortage of dollars.
However, Sri Lanka’s tentative recovery faced challenges due to Cyclone Ditwah. The cyclone, which struck in late November, resulted in the tragic loss of 649 lives and impacted nearly 10% of the 22 million population. The World Bank has estimated the damage to houses, roads, and other critical infrastructure at $4.1 billion.
Raynal Wickremeratne, co-head of research at Softlogic Stockbrokers, commented, “There seems to be stimulus potential from cyclone rebuilding. We have had seven quarters of good growth, so the consistency has been fantastic. There is scope for growth to bounce back.”
Last month, the IMF downgraded Sri Lanka’s growth forecast for 2026 from 3.1% to 2.9% and warned that inflation could reach 5.4%, slightly above the central bank’s projection of 5%. At the end of 2025, inflation was recorded at 2.1%.
In response to the immediate recovery needs, the IMF approved $206 million in emergency funding for Sri Lanka.
The IMF delegation is expected to conclude their fact-finding mission on Wednesday.
The Central Bank of Sri Lanka (CBSL) projects a growth rate of 4%-5% for this year, supported in part by increased public spending aimed at rebuilding after the cyclone. Last month, Colombo also approved an additional 500 billion Sri Lankan rupees ($1.62 billion) in spending to support those affected by the cyclone.
