Sri Lanka’s inflation is projected to remain below 3 percent through the first quarter of 2025, according to the Central Bank. This marks a breach of the lower threshold of the country’s 5 percent inflation target, which has been consistently maintained over the past several months.
The Central Bank has proposed a 5 percent inflation target, with a margin of plus or minus two percent, to President Ranil Wickremesinghe, who has reportedly accepted it.
Current projections indicate that the average quarterly inflation during Q2 2024 was below the target by more than 2 percentage points, signaling a potential breach of the inflation target in Q3 2024. This breach is expected to continue through Q4 2024 and Q1 2025, as inflation remains consistently below the target for two consecutive quarters.
Despite past criticism of Sri Lanka’s macroeconomic policies, which have led to currency crises and sovereign default, the Central Bank has maintained exceptional domestic and external monetary stability since September 2022. This stability has provided a strong foundation for economic recovery, enabling businesses to resume activities and the country to build up foreign reserves.