This table forecasts a two-stage evolution for Sri Lanka's Treasury bill yields. Initially, for January 2025, a significant and uniform easing is expected across all maturities, with projected cuts ranging from 50 to 88 basis points. The outlook then shifts for January 2026, where the trend diverges sharply: the 91-day bill is projected to reverse course with a 10 bps increase, while the longer 182-day and 364-day bills are expected to continue their decline, albeit at a much slower pace. This indicates a transition from a broad period of monetary easing to a stabilization phase where short-term rates begin to firm up even as longer-term rates remain under pressure.

This table provides a forecast of the anticipated yield adjustments for Sri Lanka's Treasury bills across three different maturities. For January 2025, a significant easing is projected, with yields for the 91-day, 182-day, and 364-day bills expected to drop by 88, 50, and 51 basis points respectively. Looking ahead to January 2026, the trend diverges; the shortest-term 91-day bill is anticipated to see a modest increase of 10 bps, while its longer-term counterparts, the 182-day and 364-day bills, are forecast to continue their decline, albeit much more slowly at 1 bps and 9 bps. Overall, the table projects a clear two-phase trajectory: an initial period of substantial rate cuts followed by a stabilization phase where short-term rates begin to rise while longer-term rates continue to flatten or ease slightly.

This table outlines the projected adjustments, measured in basis points (bps), for the yields of Sri Lanka's Treasury bills across three different maturities for two future dates. For January 2025, it forecasts a significant and uniform decrease in yields, with the 91-day, 182-day, and 364-day bills expected to fall by 88, 50, and 51 bps respectively. However, the outlook for January 2026 shows a diverging trend: the shortest-term 91-day bill is projected to reverse direction and increase by 10 bps, while the longer-term 182-day and 364-day bills are expected to continue their decline, though at a much slower pace of 1 bps and 9 bps. In essence, the table illustrates a two-stage path where an initial period of substantial rate cuts is followed by a stabilization phase where short-term rates begin to rise as longer-term rates continue to ease or flatten.

This table details the projected changes, measured in basis points (bps), for the yields of Sri Lanka's Treasury bills across three maturities for two future dates. For January 2025, it anticipates a significant and uniform decrease in yields, with the 91-day, 182-day, and 364-day bills expected to fall by 88, 50, and 51 bps respectively. However, the forecast for January 2026 shows a diverging trend: the shortest-term 91-day bill is projected to reverse direction and increase by 10 bps, while the longer-term 182-day and 364-day bills are expected to continue their decline, though at a much slower pace of 1 bps and 9 bps. In essence, the table illustrates a two-stage path where an initial period of substantial rate cuts is followed by a stabilization phase where short-term rates begin to rise as longer-term rates continue to ease or flatten.

This illustrates the recent upward trend in Sri Lanka's market interest rates by combining a trend chart with a data table. The left chart, "Movements in Selected Market Interest Rates," visually displays the trajectory of various rates over time. The right table provides the specific numerical evidence to support this trend, showing that key rates like the 91-day Treasury bill and the AWCMR (Weighted Average Short-term Money Market Rate) were higher in January 2026 than their lowest points in 2025. For instance, the table quantifies this increase, confirming that despite reaching lower levels during 2025, these rates have risen in recent months, validating the title's assertion that "Some increase in market interest rates was observed in recent months.

This illustrates that Sri Lanka's money market is operating with a surplus of liquidity. The left chart, "OPR, AWCMR, Standing Facility Rates and Market Liquidity," visualizes this surplus with the blue-shaded area representing overnight liquidity consistently above zero. It also shows that the AWCMR (red line), which was above the Overnight Policy Rate (OPR, black line) in the latter half of 2025, moderated and moved closer to the OPR in early 2026. The right chart, "Daily Currency in Circulation," displays the cyclical nature of cash demand, which peaks during holidays and then sharply declines. The accompanying text clarifies this pattern, noting that approximately LKR 260 billion returned to the banking system following the festive season. Together, these elements confirm that despite temporary cash withdrawals, the overall banking system remains well-supplied with funds.

This chart presents the Central Bank of Sri Lanka's official inflation forecast. The main title states that headline inflation is projected to accelerate gradually and reach the 5% target by the second half of 2026. The "Headline Inflation Projections" line graph visualizes this by showing past "Realised Inflation" and future "Projection" periods, with shaded bands representing the 50%, 70%, and 90% confidence intervals to indicate the uncertainty in the forecast. The text on the right explains that this expected rise is driven by growing economic demand, while importantly, inflation expectations are becoming firmly anchored around the 5% target. This forecast is based on the Central Bank's staff projections from the January 2026 monetary policy meeting.

This presents two charts detailing Sri Lanka's inflation dynamics. The left chart, "Movements of Headline and Core Inflation," tracks the trend of both overall consumer price changes (headline) and underlying inflation (core) over time. The right chart, "Contribution to Headline Inflation," breaks down the specific components driving the overall inflation rate. The most prominent piece of data is that headline inflation was recorded at a low 2.1% in December 2025. An explanatory note clarifies that this figure was influenced by rising food prices, which were attributed to two main factors: supply chain disruptions caused by Cyclone Ditwah and a seasonal increase in demand during the festive period.

This image presents a dashboard of four leading economic indicators from Sri Lanka's Central Bank, designed to illustrate the economy's resilience. Titled "Despite the slowdown in economic activity following the Cyclone, leading indicators reflect greater resilience," it displays data from 2022 to 2025 for the PMI (Purchasing Managers' Index) of Manufacturing, Services, and Construction, as well as the Industrial Production Index. Each chart uses lines or bars to show the performance trends, with specific high values like a 60.9 PMI for Manufacturing in December 2025, indicating strong sectoral expansion. Collectively, these charts provide evidence that even after a disruptive cyclone, Sri Lanka's core economic activities demonstrated significant strength and a quick recovery.

This presents a chart detailing the Sri Lankan Central Bank's key policy interest rates. It tracks three specific rates over time: the Standing Lending Facility Rate, the Standing Deposit Facility Rate, and the most important one, the Overnight Policy Rate (OPR). The central message conveyed is that the Central Bank held the OPR unchanged at 7.75% following its meeting on January 27, 2026. The rationale for this decision, as noted in the accompanying text, is the Board's belief that the current monetary policy is appropriately calibrated to guide inflation towards the 5% target.

This illustrates the strengthening of Sri Lanka's external financial position, highlighting key indicators of stability. The "Gross Official Reserves (GOR)" chart shows a positive trajectory, with reserves forecast to reach $6.8 billion in 2025. This build-up is explicitly attributed to two main drivers: the Central Bank's significant net foreign exchange purchases, which amounted to $2.8 billion in 2024, and inflows from multilateral institutions. Consequently, the USD/LKR exchange rate chart demonstrates that the Sri Lankan Rupee has remained stable, with a projected rate of approximately 309.5 per dollar in early 2026, underscoring the success of these measures in bolstering the country's foreign exchange buffers.

This illustrates the performance of two key foreign income sources for Sri Lanka. The left chart, "Tourist Arrivals," shows monthly data from 2022 to 2025, indicating that tourism remained steady with the country recording 2.36 million tourist arrivals in 2025. The right chart, "Workers’ Remittances," displays a clear upward trend, with remittances growing from USD 6.6 billion in 2024 to a stronger USD 8.1 billion in 2025. As summarized by the title, the data presents a dual economic story: stable earnings from tourism alongside a significant and continuing improvement in foreign remittances from overseas workers.

The document presents two charts from Sri Lanka's Central Bank that together explain the country's external economic outlook. The left chart, "Monthly Merchandise Trade Performance," visualizes a widening trade deficit from 2023 to 2025 using bars, while lines show the values for both exports and imports. The right chart, "Composition of Monthly Current Account," breaks down the various components of the current account, such as services and remittances. The key takeaway from these charts is the paradoxical yet positive projection that despite the growing deficit in merchandise trade, Sri Lanka's overall current account is expected to achieve a considerable surplus in 2025, indicating that other non-trade sectors are performing strongly enough to more than compensate for the trade imbalance.

Cyclone Ditwah, which occurred from 27 to 30 November 2025, caused widespread flooding, landslides, and major disruptions across all 25 districts of the country. The disaster affected approximately 490,385 families, involving 1,702,719 persons, and resulted in 643 deaths and 183 people reported missing. Housing damage was significant, with 6,228 houses fully damaged and 101,055 houses partially damaged. The most severely affected sectors included transport infrastructure, telecommunication and electricity services, as well as the food and beverages sector. The cyclone is expected to create near-term inflationary pressures, alongside spillover effects from increased government spending, with possible adverse impacts on the balance of payments (BOP) and GDP growth. However, most affected services have since been partially or fully restored.

All sectors recorded positive growth in the third quarter of 2025, marking the ninth consecutive quarter of sustained economic expansion. After a period of subdued performance, agricultural activities rebounded and expanded in both the second and third quarters of 2025. The main contributors to growth in Q3 2025 were construction, financial services, food, beverages and tobacco, and textiles, apparel, leather and related manufacturing. As a result, real GDP grew by 5.4 percent during the quarter, indicating that the economy continues to maintain a strong and positive growth momentum.

Headline inflation returned to positive territory in August 2025 and continued to rise thereafter. Inflation movements during the period were mainly driven by changes in food and non-alcoholic beverages, energy and fuel prices, services, and other components of the consumer basket. Overall, both headline and core inflation exhibited a clear upward trend throughout 2025.

The monetary policy stance remains accommodative, with the Overnight Policy Rate (OPR) maintained unchanged at the latest monetary policy review. Since June 2023, policy rates have been reduced by approximately 800 basis points, reflecting sustained monetary easing. Meanwhile, the Standing Deposit Facility Rate and the Standing Lending Facility Rate have continued to remain aligned within the established policy rate corridor.

In the government securities market, Treasury bill yields remained broadly unchanged as the government utilised available internal buffers for financing. Yield movements indicate a significant decline in 2024, followed by more moderate reductions in 2025 year-to-date, with the 91-day, 182-day, and 364-day Treasury bill yields decreasing by 5.9, 5.4, and 4.0 percentage points in 2024, and by 1.1, 0.9, and 0.9 percentage points, respectively, in 2025. Consistent with these developments, the secondary market yield curve reflects easing across maturities.

Domestic credit developments indicate strong expansion, driven primarily by sustained growth in credit to the private sector. Monthly movements in domestic credit during the year were largely influenced by private sector borrowing, while net credit to the government declined. During the period from January to October 2025, domestic credit expanded by Rs. 1,449.7 billion, with private sector credit increasing by Rs. 1,610.7 billion and net credit to the government recording a contraction of Rs. 91.2 billion. As a result, the domestic credit-to-GDP ratio stood at 62.8 percent.

Sectoral credit to the private sector has recorded broad-based expansion across all major economic sectors. With the introduction of the Monthly Survey on Loans and Advances by Licensed Commercial Banks from April 2025, credit growth has been observed in agriculture and fishing, industry, services, as well as personal loans and advances. During the period from April to October 2025, total private sector credit expanded by a provisional amount of Rs. 1,325 billion, reflecting widespread recovery in economic activity.

Net credit to the government has recently declined, primarily driven by reductions in credit from commercial banks, while Central Bank credit has remained relatively stable. Monthly data throughout 2025 indicate a consistent downward trend in net credit to the government.

Tourism and remittances have shown notable developments in 2025. Tourism earnings reached USD 2.9 billion from January to November, slightly below the USD 3.2 billion recorded in 2024, while the country surpassed two million tourist arrivals during the year. In contrast, workers’ remittances increased to USD 7.2 billion over the same period, up from USD 6.6 billion in 2024, providing a significant boost to foreign exchange inflows.

Sri Lanka’s reserves and exchange rate developments in 2025 show relative stability. Gross Official Reserves (GOR) were maintained around USD 6 billion, supported by net foreign exchange purchases by the Central Bank of Sri Lanka. The USD/LKR exchange rate depreciated by 5.5 percent during the year, following a 10.7 percent appreciation in 2024. Additionally, Sri Lanka is expected to receive USD 200 million under the IMF’s Rapid Financing Instrument, approved in December 2025.