Central Bank of Sri Lanka has increased the Overnight Policy Rate (OPR) by 100 basis points to 8.75%, citing mounting inflationary pressures, rising global oil prices linked to Middle East tensions, and growing domestic demand.
The Monetary Policy Board said the decision was taken after assessing both local and global economic conditions, noting that higher global petroleum prices had driven up domestic energy costs and pushed inflation to 5.4% year-on-year in April 2026.
According to the Central Bank, inflation is expected to remain above the 5% target in the near term before gradually easing, while short-term inflation expectations have also risen.
The Board further highlighted continued credit expansion, increased import demand, and stronger economic activity as key factors behind the policy tightening.
The statement added that Sri Lanka’s external sector has faced pressure in recent weeks due to speculative market activity and higher fuel import costs, while tourism earnings have slowed. Gross Official Reserves were reported at US$ 6.8 billion by the end of April 2026.
The Central Bank also warned that further geopolitical tensions, currency depreciation, stronger-than-expected credit growth, and indirect tax impacts could increase inflation beyond current projections.
The next monetary policy review is scheduled to be announced on July 22, 2026.
