By Uditha Jayasinghe
COLOMBO (Reuters) -Sri Lanka’s central bank kept its overnight policy rate unchanged on Wednesday, as it aims to underpin growth ahead of the country’s budget and a visit by a delegation of the International Monetary Fund for its latest review.
The Central Bank of Sri Lanka (CBSL) held the overnight policy rate at 7.75%.
The central bank said in a statement that gross domestic product expanded by an annual 4.8% in the first half of 2025, with inflation expected to hit its target of 5% by mid-2026.
Governor P. Weerasinghe said similar growth was anticipated for the July-September quarter during a briefing in Colombo.
“Monetary policy has filtered well into the economy. Indicators tracked by us point to economic growth continuing for the rest of the year,” he said.
Sri Lanka, recovering from a severe financial crisis triggered by a dollar shortage in 2022, is targeting 4.5% GDP growth this year.
Markets had widely anticipated the monetary board’s decision, given inflation was just 1.2% year-on-year in August.
“Another policy cut this year depends on the playoff created by the cut in U.S. rates, potential global volatilities that influence energy prices, alongside what levels of inflation Sri Lanka will realise in the next few months,” said Anjali Hewapathage, deputy head of macroeconomic research at Frontier Research.
The last CBSL policy meeting for this year will be held on November 25.
The central bank trimmed its benchmark interest rate by 25 basis points in May in a surprise move to support growth.
President Anura Kumara Dissanayake, who also serves as finance minister, will present the 2026 budget on November 7, which is expected to outline plans for record capital expenditure.
A delegation of the IMF will be in Colombo to conduct a fifth review. Sri Lanka completed a $22.5 billion debt rework last December with bilateral creditors and bondholders after defaulting on its foreign debt at the height of the crisis in May 2022.
(Reporting by Uditha Jayasinghe; Editing by YP Rajesh and Jacqueline Wong)
