Sri Lanka central bank holds rates on tariff uncertainty. On July 23, 2025, the Central Bank of Sri Lanka (CBSL) decided to keep its benchmark interest rate steady at 7.75%, pausing after a surprise 25-basis-point cut in May. The decision reflects caution as the nation navigates economic recovery and uncertainties surrounding U.S. trade policies. The U.S. recently reduced tariffs on Sri Lankan goods from 44% to 30%, but these duties, set to take effect on August 1, threaten the apparel sector, which accounts for 40% of exports to the U.S. and generated $4.8 billion in 2024.
The CBSL’s move aligns with expectations, as 10 of 13 analysts polled anticipated no change due to stable inflation and steady growth. Sri Lanka’s economy grew 5% in 2024, with projections of 4-5% growth in 2025, supported by a $2.9 billion IMF program. However, posts on X highlight public concern over potential cost-of-living increases if tariffs disrupt exports, particularly in apparel, which employs 300,000 people, mostly women. Colombo is actively negotiating with Washington to further lower tariffs, as the sector’s stability is vital for foreign exchange earnings.
Analysts suggest that if inflation remains below the CBSL’s 5% target, there could be room for a rate cut later in 2025. For now, the bank is prioritizing stability, monitoring global trade dynamics and domestic economic indicators to guide future policy decisions.
Published in SouthAsianDesk, July 23rd, 2025
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