Sri Lanka’s inflation target has been set at 5% for the next three years under a new Monetary Policy Framework Agreement (MPFA) signed by President and Minister of Finance, Planning and Economic Development Anura Kumara Dissanayake and Central Bank Governor Dr. P. Nandalal Weerasinghe.

The agreement was signed on 1 October 2026 under Section 26 of the Central Bank of Sri Lanka Act, No. 16 of 2023 and published in Government Gazette Extraordinary No. 2508/28 dated 1 October 2026.

Under the new MPFA, the Central Bank will aim to maintain quarterly headline inflation at 5%, with an accountability margin of plus or minus two percentage points.

Quarterly headline inflation will be measured as the simple average of the year-on-year percentage changes in the monthly Colombo Consumer Price Index (CCPI), published by the Department of Census and Statistics, for the three months of the corresponding calendar quarter.

Under Section 26(4) of the Central Bank of Sri Lanka Act, the inflation target and related parameters are reviewed once every three years, or at shorter intervals if exceptional circumstances warrant. Accordingly, 2026 marked the scheduled review of the initial MPFA signed in October 2023.

As part of the review, the Central Bank conducted a comprehensive technical assessment covering Sri Lanka’s economic structure, historical and empirical evidence, monetary policy considerations, the credibility of the framework, stakeholder views, and international experience and practices.

Based on the findings, the Central Bank communicated its proposal to the Ministry of Finance, which accepted the recommendation following consideration.

The Central Bank said it remains committed to achieving the inflation target through forward-looking and data-driven policy decisions in pursuit of its primary objective of achieving and maintaining domestic price stability.