CBSL Governor projects optimistic growth path for 2026 amid post-cyclone recovery
January 2, 2026 03:13 pm
The Governor of the Central Bank of Sri Lanka (CBSL) Dr. Nandalal Weerasinghe offered an optimistic outlook for Sri Lanka’s economy in 2026, highlighting recovery efforts following Cyclone ‘Ditwah’ and setting the tone for macroeconomic stability and growth.
Reflecting on 2025, the Governor noted, “Until Q3, growth was very close to 5%. Q4 is still uncertain because of the impact of Cyclone Ditwah, but I hope it will still be close to 5%, or a little below last year.”
Speaking in an exclusive New Year’s Day interview with Indeewari Amuwatte on Ada Derana 24’s at HydePark programme, he added that, despite the cyclone, “The reconstruction and rebuilding efforts, if spent properly and efficiently within the given period, could see growth even higher than 5%.”
On government spending for reconstruction, Dr. Weerasinghe clarified the central bank’s role: “No fiscal spending—whole responsibility is with the Parliament. We have no mandate at all. That’s why independence of monetary policy and fiscal policy is critical. But the central bank advises the government on the way forward.”
He emphasized the support available for businesses affected by the cyclone, saying, “We have issued a circular stating that businesses affected by this cyclone, if they find it difficult to service their existing loan obligations, can be granted a 3- to 6-month moratorium. They need to apply to their bank and request additional time for the first settlement of their loans.”
Assessing the resilience of the economy, the Governor highlighted the importance of fiscal and monetary buffers:
“This is the best example I can tell you during this period because the government earned a lot more revenue than what was expected last year, and they built a buffer of Rs.1 trillion in the Ministry of Finance with two state banks as a cash buffer. So that was a good buffer that they built. So that can be used now to recover and spend this amount—at least Rs. 500 billion out of this Rs.1 trillion buffer can be used to support the economy for recovery efforts.”
He further explained that key buffers include fiscal surpluses and revenue, as well as foreign exchange reserves from the country’s perspective. He added that maintaining low interest rates provides the central bank with a buffer, allowing room to reduce rates further if necessary, and that these buffers are being preserved to support the economy from multiple angles.
On the economic impact of reconstruction, the Governor added that the country does not necessarily need the cyclone event, noting that while the value of the damaged assets is about $4 billion, this represents only the physical loss.
“But in terms of economic activity, because of this destruction there has to be much economic activity created in the economy in the recovery and rebuilding efforts that will add more value to the economy going forward,” he said.
Dr. Weerasinghe encouraged private sector engagement with public investment projects and emerging sectors, stating that the government’s additional Rs. 500 billion for public investment, on top of the existing Rs.1.4 trillion, would create numerous new opportunities in areas such as construction, roads, and bridges.
He emphasized that the private sector should be prepared to step in and support these activities, as the necessary resources are available.
He also highlighted tourism, IT, digitalization, and exports as key growth areas, noting that tourist arrivals reached a record high last year and expressing his expectation that this trend would continue in 2026.
He added that this growth would create more opportunities in tourism and logistics and emphasized the need to explore additional avenues to diversify exports.
On diversifying exports and attracting foreign investment, the Governor stated, “We should diversify that more. In my view, we have potential more in the export of services. There have to be high-end, niche, specialized products. That’s where our advantage is. We are not a country where we can compete with Bangladesh or Vietnam as a low-cost destination. We are a high-end, competitive, and technology-driven sector in all areas. That’s where we need to compete, and that’s what we need to promote.”
He emphasized the importance of creating a transparent and business-friendly environment, stating that policies should be consistent, the business climate more transparent and easier to navigate, systems more open, corruption reduced, and public service delivery made more efficient.
On debt management and IMF programs, the Governor explained that Sri Lanka can service its debt comfortably, with reserves building toward $10 billion. He noted that borrowing is not a problem if done prudently, but wasting borrowed funds is an issue.
He added that the country has exited default status, ratings are improving, annual debt service is manageable, and there is no concern of another default as long as current policies continue.
He emphasized the importance of continued fiscal and monetary discipline, stating that fiscal consolidation, reserve accumulation, stable inflation, and a flexible exchange rate are key. He added that social safety measures should be targeted, temporary, accountable, and aimed at empowering people, and stressed that government funds are taxpayers’ money and must be used prudently.
Dr. Weerasinghe set a hopeful tone for 2026, stating that the next phase would focus on long-term stability and growth, and on ensuring that the policies currently being implemented continue to benefit all Sri Lankans.
