5 October 2026
The Central Bank of Sri Lanka announced that International Monetary Fund staff and the Sri Lankan authorities have reached staff-level agreement on the Seventh Review under the 4-year Extended Fund Facility arrangement.
The announcement was published on 5 October 2026.
A staff-level agreement is the stage before the IMF Executive Board considers the review.
Sri Lanka has been a member of the IMF since 29 August 1950, with a quota of SDR 578.8 million.
Review:
Seventh Review
Arrangement:
4-year Extended Fund Facility (EFF)
Stage reached:
Staff-level agreement
IMF membership:
29 August 1950
Why it matters for exams: The IMF programme is the frame within which every Sri Lankan economic decision is now taken, and review numbers are directly asked.
Kerala PSCUPSC
In plain words
EFF Extended Fund Facility — An IMF lending arrangement for countries needing medium-term support alongside structural reform.
Staff-level agreement Agreement between IMF staff and national authorities — It must still be approved by the IMF Executive Board before money is released.
SDR Special Drawing Right — The IMF's unit of account, in which member quotas are stated.
1 October 2026
A new Monetary Policy Framework Agreement was signed on 1 October 2026 setting Sri Lanka's inflation target at 5% for the next three years.
The target carries a tolerance margin of plus or minus 2 percentage points.
It was signed by Hon. Anura Kumara Dissanayake, Minister of Finance, Planning and Economic Development and President of Sri Lanka, and Dr P Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka.
The agreement was entered into under Section 26 of the Central Bank of Sri Lanka Act, No. 16 of 2023.
It was published in Government Gazette Extraordinary No. 2508/28 dated 1 October 2026.
Quarterly headline inflation is the simple average of the year-on-year percentage changes in the monthly Colombo Consumer Price Index for the three months of each calendar quarter.
Inflation target:
5%
Tolerance margin:
plus or minus 2 percentage points
Period covered:
Three years
Legal provision:
Section 26 of the Central Bank of Sri Lanka Act, No. 16 of 2023
Gazette:
Government Gazette Extraordinary No. 2508/28
Why it matters for exams: Inflation targeting agreements between a finance ministry and a central bank are a standard comparison question alongside India's own 4 per cent target.
Kerala PSCUPSC
In plain words
Monetary Policy Framework Agreement Agreement setting a central bank's inflation target — It fixes the numerical target a central bank must steer inflation towards.
CBA Central Bank of Sri Lanka Act, No. 16 of 2023 — The law that replaced the Monetary Law Act and gave the Central Bank its present mandate.
30 September 2026
The Central Bank of Sri Lanka reported that Colombo Consumer Price Index (CCPI, 2021=100) based headline inflation (year-on-year) remained unchanged at 8.0%.
Food inflation (Y-o-Y) increased to 8.7% in September 2026 from 8.5% in August 2026.
Non-food inflation (Y-o-Y) remained unchanged at 7.7%.
Core inflation (Y-o-Y) accelerated to 5.4% in September 2026 from 5.1% in August 2026.
The Central Bank published the statement on 30 September 2026.
Headline inflation (Y-o-Y):
8.0%
Food inflation (Y-o-Y):
8.7%
Non-food inflation (Y-o-Y):
7.7%
Core inflation (Y-o-Y):
5.4%
Why it matters for exams: Sri Lanka's inflation path is the standard measure of how far its post-crisis recovery has gone, and the CCPI is the index examiners name.
Kerala PSCUPSC
In plain words
CCPI Colombo Consumer Price Index — Sri Lanka's headline retail price index, with 2021 as its base year.
Core inflation Inflation excluding volatile food and energy prices — It shows the underlying price trend once volatile items are set aside.
30 September 2026
The Monetary Policy Board of the Central Bank of Sri Lanka decided to maintain the Overnight Policy Rate (OPR) at the current level of 8.75%.
The decision was announced in Monetary Policy Review No. 5 of 2026, published on 30 September 2026.
Headline inflation stood at 8.0% (year-on-year) in August 2026.
The Central Bank said headline inflation is projected to remain in high single digits through Q1-2027, before easing towards the 5% target.
The Overnight Policy Rate is Sri Lanka's single policy interest rate.
Overnight Policy Rate:
8.75%
Decision:
Maintained at the current level
Review:
Monetary Policy Review No. 5 of 2026
Headline inflation in August 2026:
8.0%
Why it matters for exams: The Overnight Policy Rate is Sri Lanka's equivalent of the repo rate, and a hold at 8.75 per cent is the figure most often asked.
Kerala PSCUPSC
In plain words
OPR Overnight Policy Rate — The single policy interest rate through which the Central Bank of Sri Lanka signals its stance.
Monetary Policy Board The Central Bank of Sri Lanka's rate-setting body — It decides the policy rate, as the Monetary Policy Committee does in India.
30 September 2026
The Central Bank of Sri Lanka reported that the external current account recorded a surplus of US$ 133 million in August 2026.
The cumulative trade deficit reached US$ 7.2 billion during January-August 2026.
Workers' remittances increased by 10.0% year-on-year to US$ 749 million in August 2026, with cumulative remittances of US$ 6.1 billion for January-August 2026.
Tourism earnings were estimated at US$ 264 million in August 2026, while cumulative earnings during January-August 2026 declined by 10.0% to US$ 2.1 billion.
Gross official reserves, including the swap facility with the People's Bank of China, increased to US$ 6.9 billion by end August 2026.
Current account balance, August 2026:
Surplus of US$ 133 million
Trade deficit, January-August 2026:
US$ 7.2 billion
Workers' remittances, August 2026:
US$ 749 million
Tourism earnings, August 2026:
US$ 264 million
Gross official reserves, end August 2026:
US$ 6.9 billion
Why it matters for exams: Remittances, tourism and reserves are the three external props of Sri Lanka's recovery and are asked as a set.
Kerala PSCUPSC
In plain words
Current account Record of a country's trade, services, income and transfers — A surplus means more foreign currency came in on these heads than went out.
GOR Gross official reserves — The foreign assets a central bank holds, counted before deducting liabilities.
7 October 2026
The Central Bank of Sri Lanka's Purchasing Managers' Index for Construction, measured by the Total Activity Index, recorded 59.4 in August 2026.
A reading in that range indicates continued expansion in construction activities, though at a slower rate than in the previous month.
Many survey respondents highlighted an ongoing bitumen shortage, which continued to constrain road construction progress.
The New Orders Index increased further in August, mainly driven by government-funded projects.
The Employment Index and the Quantity of Purchases Index both remained in expansion territory during the month.
Respondents also pointed to persistent shortages of skilled labour and raw materials as key constraints on sectoral growth.
Total Activity Index, August 2026:
59.4
Main constraint cited:
Bitumen shortage
Driver of new orders:
Government-funded projects
Compiled by:
Central Bank of Sri Lanka
Why it matters for exams: Purchasing Managers' Index readings are a standard indicator question, and Sri Lanka's economy is a recurring theme in current affairs papers.
Kerala PSCUPSC
In plain words
PMI Purchasing Managers' Index — A diffusion index built from a survey of firms; above 50 points to expansion and below 50 to contraction.
Bitumen Bitumen — A heavy petroleum product used as the binder in road surfacing.
Background
The official name is the Democratic Socialist Republic of Sri Lanka; the short form is Sri Lanka, formerly Ceylon.
The Government of Sri Lanka's country overview lists the capital as Sri Jayewardenepura.
The same overview lists Colombo as the commercial capital.
Total area is 65,610 sq km: land 62,705 sq km and inland waters 2,905 sq km.
Its history note says the capital was moved constantly until the Portuguese arrived in 1505, when the chief city was established at Kotte, in the western lowlands.
Capital (as listed):
Sri Jayewardenepura
Commercial capital:
Colombo
Total area:
65,610 sq km
Why it matters for exams: Capital versus commercial capital is a standing question in country-profile papers, and Colombo is the usual wrong answer.
Kerala PSCUPSC
In plain words
Commercial capital The city that is the country's main centre of business — Sri Lanka's government overview lists Colombo under this heading, separately from the capital.
Background
Sri Lanka's currency is the rupee (Rs.), with 100 cents equal to a rupee.
The Central Bank of Ceylon was established by the Monetary Law Act (MLA) No. 58 of 1949 and commenced operations on August 28, 1950.
The Monetary Law Act ended the Currency Board System, which had been set up under the Paper Currency Ordinance.
It was renamed the Central Bank of Sri Lanka (CBSL) in 1985.
The CBSL Act No. 16 of 2023, brought into law in September 2023, supersedes the Monetary Law Act that established the bank in 1950 as a semi-autonomous body.
Under the new act, the CBSL shall be autonomous and accountable.
Currency:
Rupee (100 cents)
Founding law:
Monetary Law Act No. 58 of 1949
Operations began:
August 28, 1950
Renamed CBSL:
1985
Present law:
CBSL Act No. 16 of 2023
Why it matters for exams: Central-bank founding statutes and renamings are routine recall items, and the 1949 Act versus the 2023 Act is an easy place to confuse candidates.
Kerala PSCUPSC
In plain words
MLA Monetary Law Act — The 1949 statute under which the Central Bank of Ceylon was established.
CBSL Central Bank of Sri Lanka — The country's apex financial institution, as its own overview describes it.
Background
The Government of Sri Lanka describes the country as a free, independent and sovereign state governed by a presidential system introduced under the constitution of 1978.
Executive power of the state is vested in the President, who is assisted by the Cabinet of Ministers.
Legislative power is exercised by the Parliament, which consists of 225 members elected by the people on a proportional representation basis.
Provincial councils, elected by the people, are the governing body at provincial level.
Local authorities are responsible for administering the urban areas and the "Pradeshiya Sabha" areas.
The judicial system is described as independent of the executive and the legislature.
Members of Parliament:
225
Method of election:
Proportional representation
Presidential system introduced under:
Constitution of 1978
Why it matters for exams: Strength of the legislature, the electoral method and the constitution that created the executive presidency are standard comparative-polity questions.
Kerala PSCUPSC
In plain words
Proportional representation An electoral method — Under it, seats are allotted in proportion to the votes won; the Government of Sri Lanka says Parliament is elected on this basis.
Background
The 13th Amendment to the Constitution was made in 1987 to the Sri Lanka Constitution of 1978.
Its objective, under a unitary constitution, was devolution of power to the provincial councils.
The devolved powers were placed in the Provincial Council List and the Concurrence List; the rest were given to the central government by a Reserved List.
Each provincial council and the central government may enact statutes on subjects in the Concurrence List.
The amendment makes provision for one provincial council in every province.
The nine provinces listed are Western, North West, Uva, Sabaragamuwa, Central, Eastern, Southern, North Central and Northern.
Amendment:
13th Amendment, 1987
Provinces:
9
Lists:
Provincial Council List, Concurrence List, Reserved List
Why it matters for exams: The nine provinces and the three legislative lists of the 13th Amendment are asked in comparisons with India's Union, State and Concurrent Lists.
Kerala PSCUPSC
In plain words
Concurrence List The list of subjects on which both the central government and provincial councils may enact statutes — This is the spelling the ministry page uses.
Reserved List The list through which the remaining powers were given to the central government — Powers not devolved to provincial councils sit here.
Background
The Department of Census and Statistics says the central highlands have peaks rising about 2000 m, with Piduruthalagala being the highest at 2524 m.
The central mountain region is surrounded by a plain rising up to about 300 m above sea level, which spreads over two thirds of the island.
Adam’s Bridge across the Palk Strait was created through the gradual separation of the island from the South Asian land-mass.
The Mahaweli occupies a unique position among Sri Lanka's rivers in both length and basin size; it is longer than the combined length of any other two rivers on the island.
Sri Lanka has a total of 103 distinct natural stream basins.
The tallest waterfall is Bambarakanda, at 241 m.
Highest peak:
Piduruthalagala, 2524 m
Prominent river:
Mahaweli
Natural stream basins:
103
Tallest waterfall:
Bambarakanda, 241 m
Why it matters for exams: Highest peak, principal river and the Palk Strait feature are staple physical-geography questions for any country profile.
Kerala PSCUPSC
In plain words
Palk Strait The strait across which Adam’s Bridge lies — The statistics department links Adam’s Bridge with the island's separation from the South Asian land-mass.
Background
The India-Sri Lanka Free Trade Agreement (ISFTA) was signed in 1998 and entered into force in March 2000.
Under it, 4,150 Indian tariff lines carry zero duty for Sri Lankan goods, and 3,932 tariff lines receive reciprocal treatment.
Special quotas apply for tea, textiles and garments with preferential margins.
More than 60% of Sri Lankan exports to India use ISFTA provisions, while only about 5% of Indian exports to Sri Lanka use these benefits.
Signed:
1998
Entered into force:
March 2000
Indian tariff lines at zero duty:
4,150
Reciprocal tariff lines:
3,932
Share of Sri Lankan exports to India using ISFTA:
More than 60%
Why it matters for exams: ISFTA is the agreement behind India-Sri Lanka trade, and its tariff-line concessions and year of entry into force are repeatedly asked.
Kerala PSCUPSC
In plain words
ISFTA India-Sri Lanka Free Trade Agreement — The bilateral trade agreement in force since March 2000.
Tariff line A single product heading in a customs tariff schedule — Concessions in a trade agreement are counted in tariff lines.