Sri Lanka’s Inflation Target is set at 5% for the next three years: CBSL

The Minister of Finance, Planning and Economic Development and the President of Sri Lanka, Hon. Anura Kumara Dissanayake, and the Governor of the Central Bank of Sri Lanka, Dr. P Nandalal Weerasinghe, signed a new Monetary Policy Framework Agreement (MPFA) in terms of Section 26 of the Central Bank of Sri Lanka Act, No. 16 of 2023 (CBA) on 01 October 2026. The Agreement was published in Government Gazette Extraordinary No. 2508/28 dated 01 October 2026.

Key features of the MPFA

Inflation target: The Central Bank shall aim to maintain quarterly headline inflation rate at 5%
Accountability margin: A margin of ±2 percentage points
Measure of inflation: Quarterly headline inflation is the simple average of the year-on-year percentage changes in the monthly Colombo Consumer Price Index (CCPI), published by the Department of Census and Statistics, for the three months of the corresponding calendar quarter.

In terms of Section 26(4) of the CBA, the inflation target and related parameters are reviewed once in every three years, or at shorter intervals if exceptional circumstances so warrant. Accordingly, 2026 marked the scheduled review since the initial MPFA, which was signed in October 2023.

As part of the review, the Central Bank undertook a comprehensive technical assessment that considered Sri Lanka’s economic structure, historical and empirical evidence, monetary policy considerations, the credibility of the framework, stakeholder views, and international experience and practices. Based on the findings of the review, the Central Bank communicated its proposal to the Ministry of Finance. The Ministry, after careful consideration, accepted the recommendation.

The Central Bank remains committed to achieving the inflation target through forward-looking and data-driven policy decisions, in pursuit of its primary objective of achieving and maintaining domestic price stability.

The Government Gazette is accessible at https://www.cbsl.gov.lk/en/monetary-policy/monetary-policy-framework-agreement