CBSL assures SL’s economic ‘shock absorbers’ intact

• Governor Dr. Weerasinghe implies island nation is better positioned today than in earlier crises to absorb unexpected blows
• Says CBSL remains ready to provide liquidity support to the banking system if necessary, though in the last few days, this hasn’t been required

Dr. Nandalal Weerasinghe

“From the government side, short-term fiscal relief is manageable, and externally, we are in a better position than before. If needed, we have sufficient buffers to provide support” 

- CBSL Governor  

By Shabiya Ali Ahlam

The Central Bank of Sri Lanka (CBSL) is ready to deploy its full suite of macroeconomic shields, fiscal, monetary and external, to cushion the economy against sudden shocks, Governor Dr. Nandalal Weerasinghe said.

Speaking to a fully packed audience comprising of business leaders and government officials at the Sri Lanka Economic and Investment Summit 2025, that went ahead as scheduled in Colombo yesterday, the governor helped somewhat ease growing concerns over the economic fallout from climaterelated events such as Cyclone Ditwah and its aftermath.

He assured the island nation is better positioned today than in earlier crises to absorb unexpected blows.

“Earlier this year, we faced an unexpected external shock, and we already had plans in place. Climate-related shocks are internal events we’ve seen before. The key to handling them is having sufficient macro buffers, fiscal, monetary, external, and even in the banking sector. These buffers are not for normal circumstances but for times like these,” said Dr. Weerasinghe.

With these channels now operational, alongside the state bank accounts accepting donations from local and international supporters, the CBSL has laid the groundwork for timely relief disbursement.

“From the government side, short-term fiscal relief is manageable, and externally, we are in a better position than before. If needed, we have sufficient buffers to provide support,” he added.

On the monetary front, the Central Bank remains ready to provide liquidity support to the banking system if necessary, though in the last few days, this hasn’t been required.

Historically, the Central Bank has used such tools to manage liquidity stress. During the pandemic it injected over Rs. 250 billion, and when the economy faced acute liquidity shortages in 2022, it deployed emergency support to prevent systemic destabilisation. 

The external sector buffer has also strengthened. The CBSL’s latest data show foreign exchange reserves climbed to around US$ 6.2 billion as at end October 2025, supported by record foreign exchange purchases and improved balance of payments dynamics. 

With Sri Lanka still vulnerable to climate shocks and global external headwinds, the institutional emphasis, across fiscal, monetary and reserve management, is on safeguarding economywide stability in the face of volatility, the Governor noted.