Sri Lanka’s inflation stood at 2.1% in 2025, well below the central bank’s 5% target, but is expected to rise gradually in 2026, the monetary authority said.

The Central Bank of Sri Lanka noted that while low inflation can ease pressure on consumers, persistently undershooting the target indicates weak economic demand.

The country is still recovering from its worst economic crisis in 2022, when a foreign exchange shortage left it unable to pay for essential imports such as food, fuel, and medicines.

Recovery efforts were dealt a further blow in November, when a powerful cyclone killed at least 643 people, left another 183 missing and affected more than 10% of the population. The World Bank estimates the storm caused about $4.1bn in direct damage to buildings and agriculture.

Official data show the Colombo Consumer Price Index (CCPI) rose to 195.8 in December from 191.7 a year earlier, translating into annual inflation of 2.1%.

In a statement, the central bank said its latest projections, updated since November 2025, point to a “gradual acceleration” of inflation towards the 5% target in the period ahead.

Sri Lanka has secured a $206m emergency loan from the International Monetary Fund to help cover part of the disaster relief costs.

It has also been working to stabilise its fragile economy under a $2.9bn IMF bailout programme agreed in early 2023.