Sri Lanka’s Central Bank has increased the Overnight Policy Rate (OPR) by 100 basis points to 8.75%, citing rising inflationary pressures, higher global oil prices linked to Middle East tensions, and growing demand in the domestic economy.
The Monetary Policy Board said the decision was taken after assessing evolving domestic and global economic conditions, noting that elevated global petroleum prices have led to sharp increases in domestic energy costs and pushed inflation to 5.4% year-on-year in April 2026.
The Central Bank said inflation is expected to remain above the 5% target in the near term before easing gradually, while short-term inflation expectations have also increased.
The Board also pointed to continued credit expansion, rising import demand, and stronger economic activity as contributing factors behind the tightening move.
The statement noted that Sri Lanka’s external sector has come under pressure in recent weeks due to speculative activity and higher fuel import expenditure, while tourism earnings have slowed. Gross Official Reserves stood at US$ 6.8 billion by end-April 2026.
The Central Bank warned of risks from possible further geopolitical escalations, currency depreciation, stronger-than-expected credit growth, and indirect tax impacts, all of which could push inflation higher than projected.
The next monetary policy review is scheduled to be released on July 22, 2026. (Newswire)
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