Sri Lanka’s 5% inflation target unchanged for next three years: CB

ECONOMYNEXT – Sri Lanka’s inflation target for the next three years through October 2029 will be maintained at 5 percent and the agreement was signed between the government and the Central Bank, the monetary authority said in a statement on Friday.

The new  Monetary Policy Framework Agreement (MPFA) in terms of the latest Central Bank of Sri Lanka Act was signed between President Anura Kumara Dissanayake in his capacity as the Minister of Finance and Central Bank Governor Nandalal
Weerasinghe on Thursday (01), it said.

As per the new MPFA, the Central Bank shall aim to maintain quarterly headline inflation rate at 5% with a margin of ±2 percentage points. This means the Central Bank has to maintain the inflation between 3% and 7%.

The move comes at a time when the Central Bank has failed to maintain the inflation target at its upper limit of 7 percent in the last three months. The Bank has blamed =higher energy price for the deviation following the Middle East conflict.

As per the new Central Bank Act, the inflation target and related parameters are reviewed once in every three years, or at shorter intervals if exceptional circumstances so warrant.

“As part of the review, the Central Bank undertook a comprehensive technical assessment that considered  Sri Lanka’s economic structure, historical and empirical evidence, monetary policy considerations, the credibility of the framework, stakeholder views, and international experience and practices,” the Central Bank said in a statement.

“Based on the findings of the review, the Central Bank communicated its proposal to the Ministry of Finance. The Ministry, after careful consideration, accepted the recommendation.”

Critics have argued that a 5% inflation target is too high and it should be reduced to 2%. However, the Central Bank has said such reduction would have an adverse impact on the country’s economic growth. (Colombo/October 02/2026)