CBSL Governor Clarifies Mandate: Stability Over Growth 📈

Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe has explicitly defined the institution's post-crisis role, emphasizing that its primary mandate is monetary and financial stability, not the direct promotion of economic growth or productivity. • Core Mandate: The Governor clarified that while macroeconomic stability is essential for growth, the CBSL's tools are limited to maintaining price stability. Responsibilities for productivity, digitization, and industrial upgrading lie with the government and the private sector. • Investment & FDI: Highlighting that monetary stability alone cannot drive Foreign Direct Investment (FDI), Dr. Weerasinghe noted that legal certainty, policy consistency, and institutional quality are the critical drivers sitting outside the CBSL’s purview. • Inflation & Cost of Living: • Current Target: Policy aims to manage inflation around 5%. • Context: Inflation peaked at ~70% in 2022; the Governor noted that while the rate of increase has slowed, the cost of living only stabilizes rather than decreases unless deflation occurs. • External Sector & IMF: • Net International Reserves (NIR): Targets may be revised following IMF reviews, accounting for global risks like Middle East tensions and oil price volatility. • Policy Rates: Decisions remain strictly "data-driven," evaluating inflation expectations and growth prospects ahead of the next review. • Future Programs: No decision has been made regarding a follow-up IMF program once the current EFF arrangement concludes.