The Central Bank of Sri Lanka (CBSL) released its latest Market Operations Report (MOR) on 31 July 2026. The MOR aims to enhance stakeholder understanding of the monetary and foreign exchange operations undertaken by the CBSL in the pursuit of implementation of monetary policy within the Flexible Inflation Targeting (FIT) framework, supported by the flexible exchange rate regime.
The latest MOR provides an overview of the policy stance of the CBSL, liquidity conditions, short-term interest rate and exchange rate developments, as well as money market and domestic foreign exchange market operations of the CBSL, with a particular focus on the first half of 2026. The MOR also presents two feature articles on timely topics and includes selected indicators of market operations and transactions.
Key Highlights:
- The Central Bank tightened its monetary policy stance in 2026 to safeguard price stability. Tightening of monetary policy, along with macroprudential and foreign exchange related measures, supported external sector stability.
- Surplus liquidity in the domestic money market persisted, supported primarily by the Central Bank’s net foreign exchange purchases, despite intermittent declines.
- Short-term interest rates adjusted upward in response to monetary tightening, reflecting effective monetary policy transmission during the first half of 2026.
- The Central Bank aligned its monetary operations with the prevailing monetary policy stance to manage liquidity, steer short-term interest rates, and support orderly conditions in the money and foreign exchange markets.
- The exchange rate experienced some depreciation pressures during the first half of 2026 amid heightened global uncertainties and elevated foreign exchange demand.
- The Central Bank intervention in the domestic foreign exchange market was primarily aimed at curtailing undue exchange rate volatility while accumulating reserves at opportune times.
- Activity in the domestic interbank foreign exchange market moderated during the first half of 2026 amid heightened external uncertainties, before improving towards the end of the period.
- The growth in rupee deposits moderated during the first half of 2026, while refinements to the Statutory Reserve Requirement framework strengthened reserve management and the effectiveness of monetary operations.
- Currency in circulation and reserve money increased.
- The Central Bank’s holdings of Government securities declined marginally during the first half of 2026.
