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Sri Lanka: Inflation in 2025 remains well below official target
Inflation in Sri Lanka stood at around 2.1% in 2025, significantly lower than the 5% target set by the country’s central bank, according to official figures released at the beginning of 2026. While low inflation may appear beneficial for consumers, authorities warn that it also reflects ongoing economic weaknesses.
The Colombo Consumer Price Index recorded a modest annual increase, pointing to subdued domestic demand and cautious household spending. Economists note that inflation remaining below target for an extended period can signal fragile economic recovery following years of financial instability.
In a statement, the Central Bank of Sri Lanka said inflation is expected to gradually rise in 2026, supported by adjusted monetary and fiscal policies aimed at stabilizing growth and restoring confidence.
Food prices, however, showed temporary upward pressure toward the end of the year after a powerful cyclone caused floods and landslides across large parts of the island. The disaster disrupted supply chains and affected millions of residents.
In response, the International Monetary Fund approved emergency financial assistance to help cover relief and reconstruction costs. The cyclone struck a nation still recovering from its worst economic crisis in decades, during which Sri Lanka defaulted on its debt and later entered an IMF-backed recovery program that included strict austerity measures.