The Central Bank of Sri Lanka is mandated to maintain the quarterly headline inflation rate at 5%, at an accountability margin of ±2 percentage points till October of 2029, under the new Monetary Policy Framework Agreement (MPFA), signed by the Government of Sri Lanka, and the CBSL.

According to the agreement that was published in Government Gazette Extraordinary No. 2508/28 dated 1 October 2026, Sri Lankan President Anura Kumara Dissanayake, in his capacity as Minister of Finance, Planning and Economic Development and the Governor of the Central Bank of Sri Lanka Dr P Nandalal Weerasinghe – signed the agreement in terms of Section 26 of the Central Bank of Sri Lanka Act, No. 16 of 2023 (CBA) on 1 October 2026. 

In terms of Section 26(4) of the CBA, 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 since the initial MPFA, which was signed in October 2023.

As part of the review, the Central Bank undertook a comprehensive technical assessment that considered 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 of the review, the Central Bank communicated its proposal to the Ministry of Finance. The ministry, after careful consideration, accepted the recommendation.