The Governor of the Central Bank of Sri Lanka has indicated that the country can control inflationary pressures if global oil prices hold steady around US$80 per barrel through the end of the year, while signaling expectations for moderate economic growth.
Sri Lanka's ability to manage current inflationary pressures hinges on global oil prices remaining stable at approximately US$80 per barrel, according to Central Bank Governor Nandalal Weerasinghe. Speaking during a delegation visit to Sydney, Australia, he cautioned that any unexpected spikes in energy costs would present additional challenges for the island nation's economy.
Weerasinghe expressed optimism that inflation will gradually decline toward the Central Bank's 5% target during the latter half of this year and into 2025. He attributed this anticipated improvement to monetary policy adjustments implemented in May, when the Central Bank increased its benchmark interest rate by one percentage point to moderate credit demand. The bank subsequently maintained its overnight policy rate unchanged in July as authorities attempted to balance price stability with supporting economic growth. Government measures designed to restrict imports have also contributed to efforts to contain inflationary pressures.
Regarding broader economic performance, the Governor projected that Sri Lanka's growth will moderate to between 4% and 5% in the second half of 2024, despite elevated global uncertainty. He suggested that tighter monetary conditions and higher prices are unlikely to significantly impede economic expansion. This outlook comes as the country continues its recovery from the severe economic crisis that led to sovereign default in 2022 and prompted entry into an International Monetary Fund assistance program.
Weerasinghe indicated that Sri Lanka is on track to complete its four-year IMF programme by the second half of 2027, with the next program review anticipated around November or December this year. The Central Bank Governor made these remarks while leading efforts to promote investment opportunities in the Colombo Stock Exchange.
