The Central Bank of Sri Lanka (CBSL) released its latest Weekly Economic Indicators on 27 February 2026, providing a comprehensive snapshot of the country’s economic performance up to the end of the previous week. The report highlights continued moderation in inflation, a narrowing merchandise trade deficit, stable gross official reserves, and a resilient real sector, particularly in construction activity. These developments reflect the ongoing consolidation of macroeconomic stability as Sri Lanka advances through early 2026.
This professional analysis examines the key data points from the official CBSL report, focusing on verified figures and trends without external assumptions. The indicators point to a balanced economic environment, with low inflation supporting purchasing power, external sector improvements bolstering foreign exchange buffers, and positive real sector signals indicating recovery momentum. For policymakers, investors, and businesses, the February 2026 weekly indicators underscore Sri Lanka’s steady progress toward sustainable growth.
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Inflation Continues to Moderate Across Key Measures
Headline inflation in Sri Lanka showed further deceleration in January and February 2026, reinforcing the effectiveness of monetary policy in maintaining price stability. According to the National Consumer Price Index (NCPI, base 2021=100), year-on-year headline inflation eased to 2.4 per cent in January 2026, down from 2.9 per cent in December 2025. Food inflation stood at 3.4 per cent while non-food inflation was recorded at 1.6 per cent. Core inflation, which excludes volatile food and energy items, also declined to 2.2 per cent in January from 2.6 per cent the previous month.
The Colombo Consumer Price Index (CCPI, base 2021=100) provided an even more positive update for February 2026. Headline inflation decelerated to 1.6 per cent year-on-year, compared with 2.3 per cent in January 2026. Food inflation dropped sharply to 0.2 per cent, while non-food inflation was 2.3 per cent. Core inflation eased to 2.1 per cent from 2.3 per cent.
These figures represent some of the lowest inflation levels observed in recent years, creating a favourable environment for consumers and businesses. Lower inflation supports real income growth, encourages domestic consumption, and helps anchor inflation expectations around the CBSL’s medium-term target. The consistent downward trend across both NCPI and CCPI measures signals that supply-side pressures from earlier events have eased, while demand remains well-managed.
External Sector Shows Resilience with Narrowing Trade Deficit and Stable Reserves
Sri Lanka’s external sector recorded solid performance in January 2026, contributing to overall macroeconomic stability. The merchandise trade deficit narrowed to US dollars 655 million in January 2026, an improvement from US dollars 733 million in January 2025. This positive development was driven by robust export growth of 9.1 per cent year-on-year to US dollars 1,149 million, while import expenditure rose only marginally by 1.0 per cent to US dollars 1,803 million.
Terms of trade deteriorated by 2.9 per cent year-on-year to 87.3 index points, reflecting faster increases in import prices compared to export prices. Nevertheless, the overall trade balance benefited from the stronger export performance.
Gross official reserves, including the swap facility with the People’s Bank of China, were provisionally estimated at US dollars 6,832 million at the end of January 2026. This level provides a comfortable buffer for import coverage and external obligations. The Sri Lanka rupee recorded a year-to-date appreciation of 0.2 per cent against the US dollar as of 27 February 2026, indicating continued stability in the foreign exchange market.
Workers’ remittances and services inflows, though not detailed in the weekly report, have historically supported the current account. The narrowing trade gap and stable reserves in January 2026 align with broader external sector improvements observed in recent months, enhancing Sri Lanka’s external resilience.
Monetary and Interest Rate Developments Reflect Balanced Liquidity Conditions
Monetary sector indicators for the week ending 27 February 2026 showed measured adjustments in key rates and ample liquidity in the banking system. The Weekly Average Weighted Prime Lending Rate (AWPR) increased by 40 basis points to 9.35 per cent compared to the previous week. The Average Weighted Call Money Rate (AWCMR) rose slightly to 7.69 per cent on 27 February from 7.67 per cent at the end of the prior week.
These modest increases in lending and call money rates suggest orderly market conditions without signalling tightness. The Central Bank’s policy stance continues to support credit growth while guarding against any re-emergence of inflationary pressures.
Market liquidity remained comfortably in surplus, reaching Rs. 358.76 billion by 27 February 2026, up from Rs. 280.75 billion the previous week. This expansion in surplus liquidity provides commercial banks with flexibility to meet credit demand from productive sectors. Reserve money decreased compared to the previous week, primarily due to lower deposits held by commercial banks with the Central Bank.
Government securities auctions demonstrated strong investor appetite. The auction for Treasury Bills recorded an oversubscription rate of approximately 2.3 times, while Treasury Bonds saw an oversubscription of 2.8 times. However, total secondary market transactions in Treasury Bills and Bonds declined by approximately 7.6 per cent during the reporting week compared to the week before. Yields on Treasury Bills and Bonds remained broadly stable, with only a small decrease observed in Treasury Bill rates.
Real Sector and Market Performance Indicate Steady Momentum
The real sector delivered encouraging news with the Sri Lanka Purchasing Managers’ Index for Construction (PMI – Construction) reaching 75.0 in January 2026. This marks the second-highest reading on record, surpassed only by the peak of 75.7 in July 2020. The strong Total Activity Index reflects robust expansion in construction activity, likely supported by post-event rebuilding efforts and private sector projects.
Equity market performance was mixed during the week. The All Share Price Index (ASPI) declined by 0.17 per cent to close at 23,734.06 points. The S&P SL 20 Index fell by 1.27 per cent to 6,635.97 points. Despite the weekly dip, these levels remain elevated compared to earlier periods, indicating sustained investor interest in the Colombo Stock Exchange.
Crude oil prices (Brent and WTI) decreased during the period under review (23–27 February 2026) by US dollars 0.75 and US dollars 0.83 per barrel respectively, which could help moderate import costs in coming months.
Overall, the combination of high construction PMI, surplus liquidity, and stable government securities demand points to underlying economic resilience and confidence among domestic stakeholders.
From Economic Indicators: Positive Foundations for Continued Economic Progress
The CBSL Weekly Economic Indicators for 27 February 2026 paint a picture of a stable and gradually strengthening Sri Lankan economy. Low and moderating inflation, a narrowing trade deficit, comfortable reserve levels, ample liquidity, and exceptional construction sector momentum form a solid base for the months ahead.
These developments support the CBSL’s broader objective of maintaining inflation around the 5 per cent medium-term target while fostering sustainable credit growth and external balance. Businesses and households can benefit from predictable price levels and stable exchange rates, while investors gain reassurance from transparent and timely data releases.
As Sri Lanka moves further into 2026, sustaining these positive trends will depend on continued prudent monetary and fiscal management, export diversification, and targeted support for key sectors such as construction and tourism-related services. The official weekly indicators serve as an important tool for monitoring progress and informing decision-making across the economy.
The February 2026 report confirms that Sri Lanka’s macroeconomic framework remains on a steady path, offering a favourable environment for recovery and long-term growth.
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