Sri Lanka’s financial system stability at much better place than where it was – Central Bank Governor

Colombo : Sri Lanka’s financial system currently stands at a much better and stronger place at present than where it was a year or two ago when the economy came crashing down, sending the asset quality into a tailspin and growth into reverse when people and businesses shunned new loans when the rates were at sky high levels.

“In financial stability, we can see clearly that it is much better than in the past. There is a lot of improvement in financial system stability,” Central Bank Governor, Dr. Nandalal Weerasinghe reassured.

Unveiling what is called as the Financial Stability Review for 2025, which was put out on October 09, Dr. Weerasinghe said it cannot simply be overstated the significance of the stability of the financial system for an economy as collapse of a single entity could have the contagion effect, bringing the entire system down.

He said maintaining financial stability is equally important as maintaining the price stability, the latter of which the Central Bank does once every two months by way of deciding on the monetary policy and communicating it via a post meeting press conference.

The primary mandate of the Central Bank in Sri Lanka is to maintain price stability after which they are responsible for upholding the financial system stability by way of ensuring sound indicators in the financial system consisting mainly of the licensed banks and the finance companies and a few micro-lenders.

While the new Central Bank Act requires an assessment of the financial system only once a year by way of a comprehensive report, the Governor is of the belief that the communication must be more frequent so that the public would know how significant it is and also what actions the Central Bank does to ensure its stability.

Hence he plans to communicate and update the public of the financial system more frequently going forward, likely at least twice a year.

Turning to the growth in the economy, the Governor said the economy is growing at a healthy clip of 5.0 percent.

“We see the trend continuing into the next year as well. Our projections indicate that there will be at least 4 to 5 percent growth next year, a healthy, comfortable and a good growth”, he added. Dr. Weerasinghe recently snapped a reporter who had concerns about the economy growing at 4.5 percent, moderating from the 5.0 percent growth in 2024.

He said there is no hard-and-fast rule that an economy must grow at the same level every year and there could be volatility and in Sri Lanka, the growth is happening on a higher base, coming off from a 5.0 percent growth in 2024, still making it a formidable growth for the economy.