The Central Bank of Sri Lanka (CBSL) has announced that the nation has achieved significant macroeconomic and financial stability following its most severe economic crisis. This recovery is attributed to decisive policy actions and a collective commitment to economic reforms.
In 2024, Sri Lanka’s economy rebounded robustly, recording a 5% growth—the highest since 2017. This expansion was supported by renewed business and consumer confidence, alongside a notable deceleration in inflation. Headline inflation declined steadily, reaching deflationary levels in the latter part of the year, influenced by factors such as reductions in energy prices and a stronger currency.
The successful completion of a $25 billion debt restructuring in December 2024 and the continuation of the Extended Fund Facility arrangement with the International Monetary Fund (IMF) have been pivotal in stabilising economic conditions. These developments led to an upgrade in the country’s sovereign rating by leading agencies, significantly reducing Sri Lanka’s risk premium.
Monetary policy remained accommodative throughout 2024, with the CBSL reducing policy interest rates to support economic recovery. The introduction of a single policy interest rate mechanism, the Overnight Policy Rate (OPR), in November 2024, marked a shift towards a more streamlined monetary policy framework.
The external sector also showed positive momentum, with the Balance of Payments strengthening and the current account recording a surplus for the second consecutive year. Gross official reserves increased to approximately $6.1 billion by the end of 2024, compared to $4.4 billion at the end of 2023.
Financial system stability was reinforced through the strengthening of the regulatory framework and improved risk management. The banking sector’s soundness improved, with reductions in non-performing loan ratios and enhancements in capital adequacy.
Looking ahead, the CBSL emphasises the importance of sustained economic growth through innovation, productivity enhancement, and unwavering commitment to structural reforms. As it celebrates its 75th anniversary, the Central Bank remains dedicated to maintaining domestic price stability and securing financial system stability, thereby fostering an environment conducive to prosperity for all stakeholders in the economy.
