Sri Lanka economy grew 5% in 2025: CBSL tells CoPF

The Central Bank of Sri Lanka (CBSL) says Sri Lanka’s economy recorded 5% growth in 2025, and that agriculture, industry, and services all expanded during the year.

CBSL officials made these remarks when presenting the CBSL 2025 Annual Economic Review to the Committee on Public Finance (CoPF) at Parliament.

The CoPF is chaired by MP Dr. Harsha de Silva. However, as he had informed the committee that he would not be present, the meeting was held under the chairmanship of MP Attorney-at-Law Rauff Hakeem. The meeting was attended by Deputy Minister Nishantha Jayaweera, Dr. Kaushalya Ariyarathne, and MPs Ravi Karunanayake, Harshana Rajakaruna, Wijesiri Basnayake, and Nimal Palihena. At this meeting, CBSL presented the 2025 Annual Economic Review.

According to the review, inflation turned positive from August 2025, mainly due to price increases in the non-food category.

CBSL also reported progress in public finances. Government revenue increased to 16.6% of GDP. The primary account surplus was 5.4% of GDP, while the overall budget deficit fell to 2.3% of GDP. Central government debt declined to 91.6% of GDP.

CBSL officials said worker remittances reached a record US$ 8.1 billion, while tourism earnings were US$ 3.2 billion. They added that the trade deficit widened, as import expenditure increased following the removal of restrictions on vehicle imports.

On foreign exchange and reserves, CBSL officials said the Sri Lankan rupee depreciated by 5.6% against the US dollar in 2025, while gross official reserves rose to US$ 6.8 billion by year-end.

CBSL stated that due to its accommodative (loose) monetary policy, market interest rates declined, and credit to the private sector recorded 25.2% growth, which officials described as a record.

The review also noted improvements in the labour market as economic activity returned to normal. The unemployment rate fell to 3.9%, while labour force participation increased to 49.4%.

Looking ahead, the review warned that new economic challenges could emerge in 2026 due to the war situation in the Middle East and climate change. Although there had been a balance of payments surplus for about three years, CBSL officials told the committee there is a tendency for it to turn into a deficit this year.

During the discussion, the committee drew CBSL’s attention to the importance of implementing special mechanisms such as a “Bad Bank” concept to address non-performing loans in state banks, and to the impact of the high interest rate spread on economic growth.

CBSL officials also told the committee that the government has introduced a main consolidation plan to merge small banks and finance companies, with the aim of building a technologically and financially strong institutional system. The committee stressed the need to protect small-scale entrepreneurs through these reforms and to ensure the stability of the financial system.

The committee also discussed strategic actions taken by CBSL to maintain official reserves at an optimal level while preventing a sharp depreciation of the Sri Lankan rupee.

The meeting was attended by senior CBSL officials, including Governor Dr. Nandalal Weerasinghe.

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