Sri Lanka’s Central Bank (CBSL) is anticipating that strengthened reserves, sustained domestic improvements, and a sovereign ratings upgrade to signal a favourable environment for Foreign Direct Investments (FDIs) in 2026, CBSL Governor Nandalal Weerasinghe said, during the first Monetary Policy Review of the year, held yesterday (28).

“With Foreign [investments] we need to have some more  stability, that's why this continuous steady improvement in overall macroeconomic stability is important and also the rating upgrade will be crucial, to further enhance foreign direct investments FDIs.”

On Tuesday (27), CBSL Monetary Policy Board decided to maintain the Overnight Policy Rate (OPR) 7.75%, in the view that the stance will support steering inflation towards its target of 5%. 

In September of 2025, S&P Global Ratings upgraded Sri Lanka’s sovereign rating to CCC+, up from a Selective Default (SD), based on a stable outlook, however, the ratings agency also noted the setbacks in the process of Sri Lanka clearing its remaining commercial debt, particularly with regards to the defaulted $ 175 million bond on its national carrier SriLankan Airlines.

“While Sri Lanka has been actively negotiating with creditors on remaining commercial debt still in default, including SriLankan Airlines’ government-guaranteed bonds, we believe that, based on the passage of time, further resolution is unlikely under current circumstances,” the agency said.

By November 2025, SriLankan Airlines and the Government of Sri Lanka reached an agreement in principle with bondholders to restructure the $ 175 million bond, which included a 15% haircut.

Weerasinghe said that at this juncture, Sri Lanka is to focus more on building foreign exchange earnings, rather than awaiting foreign investments. “As a country we ourselves earn foreign exchange, that's where one source is tourism, another one is remittances and the other one is exports. That has been the case for the last three years and continuously we have been able to record current account surpluses.”

Sri Lanka's current account recorded deficits in September and October of 2025, which were then reversed when it recorded a surplus of $ 81.7 million in November. However, the surplus earned was narrower than the surplus earned at the same time period in 2024. The deficits in 2025 were attributed to the unforeseen substantial rise in vehicle imports, which widened the trade deficit, as evinced by CBSL data. 

“This year also we will record a current account surplus, in terms of more foreign exchange earnings than what we are going to spend this year, that’s important. Obviously, investment is important to support the growth that will happen over a period of time.

“Certain things like rating will have to be improved. We are hoping that this year there will be an upgrade in sovereign ratings. Last year we had an upgrade, this year another upgrade. This will improve the confidence, that will certainly help improve the trust and confidence of investors, and support more foreign investments coming in.”

Weerasinghe further added that the reserve bank has been building its reserve buffers, with the goal of ensuring that Sri Lanka is capable of better weathering external or internal shocks that may arise during the year, especially post-cyclone Ditwah, after which the Government pledged to spend 34% more for the year in capital expenditure (Rs.500 billion) on reconstruction.

“If you look at the month of December, we have been intervening and purchasing a large amount of foreign exchange to build reserves up to this point. We can see this continuing this month as well. What we see now is that there has been more inflows than outflows, as a result we have been intervening and purchasing reserves, and to build more buffers. That process is happening this month as well.

“Any internal shock is why it’s important to build sufficient buffers. That’s the only way authorities or the Government can mitigate the impact of any kind of unexpected shock. This is where on the Government fiscal side, the Government built additional cash buffers, so that they will be able to use that buffer to mitigate the impact to the economy.”