Sri Lanka’s financial system stability strengthens, says CB Governor
Sri Lanka’s financial system has regained significant stability, marking a sharp turnaround from the crisis years, with improved fiscal discipline, stronger revenues, and steady economic growth driving confidence across markets, Central Bank (CB) Governor Dr. Nandalal Weerasinghe said on Thursday.
Speaking in Colombo at the launch of the Financial Stability Review 2025, Dr. Weerasinghe said the country’s financial sector is now “much stronger” than it was a year ago, reflecting better asset quality, fiscal management, and debt dynamics. “We can see clearly that financial stability has improved significantly,” he said, describing it as one of the strongest signs of post-crisis recovery.
He noted that the Government’s fiscal performance has exceeded expectations, with revenue and primary surplus targets projected to outperform budget forecasts for the first time in decades. “Revenue is expected to surpass 15.3 per cent of GDP, and the primary surplus will be higher than the 2.3 per cent target,” he said, calling it a “rare display of fiscal discipline.”
A surge in vehicle imports following the easing of restrictions has also boosted revenues, with Sri Lankans expected to spend around US$1.5 billion on vehicles this year well above initial projections of $1 billion. This, Dr. Weerasinghe said, has contributed to stronger fiscal results and a lower-than-expected deficit.
On credit conditions, the Governor said the private sector credit recovery remains steady and sustainable, as lending gradually shifts away from the public sector. “The share of public sector credit is coming down, creating more space for private credit growth. This reflects a healthy rebalancing, not a risk,” he clarified.
Dr. Weerasinghe emphasised that financial intermediation remains below pre-crisis levels but is improving in line with the recovery. Margin trading exposure, he noted, remains small, with total margin loans rising from Rs. 14 billion in January to Rs. 60 billion by end-August.
He noted that the CB would work with financial institutions to reduce intermediation expenses and interest margins, which are still above 4 per cent through improved transparency, improved competition, and asset quality.
The Governor reaffirmed inflation to settle at the target rate of 5 per cent next year, as GDP growth is expected to be between 4 per cent and 5 per cent in 2026, following a 5 per cent expansion this year.
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