CBSL Renews Call for Reform Momentum Amid Global Volatility 📈

The Central Bank of Sri Lanka (CBSL) has emphasized the critical need to sustain structural reforms to safeguard macroeconomic stability as global shocks become the "new normal." • Economic Performance & Outlook • The economy grew by 5% in 2025, marking the second consecutive year of expansion. • Current account recorded a surplus for the third straight year, supported by workers’ remittances and services exports. • Inflation returned to positive territory in August 2025 following a deflationary period. • Fiscal Targets & Risks • Government targets for 2027: Revenue > 15% of GDP, Budget deficit < 5%, and a primary surplus of ~2.6%. • A Rs. 500 Bn supplementary estimate for Cyclone Ditwah recovery is adding near-term fiscal pressure. • Risks include prolonged Middle East conflict, higher energy costs, and potential subsidy requirements. • Sectoral & Structural Focus • Financial Sector: Strengthened in 2025 with improved credit growth and capital buffers. • External Sector: Trade deficit expected to widen in 2026 as imports outpace exports; reserve accumulation remains a priority. • Investment: Urgent call for reforms to improve the business climate and attract Foreign Direct Investment (FDI). • Key Stability Factors • Maintaining a market-determined exchange rate and building fiscal/external buffers are vital to counter intensifying global shocks and weaker global demand.