Governor of the Central Bank of Sri Lanka (CBSL), Dr Nandalal Weerasinghe, has warned that Sri Lanka’s inflation rate could rise to 7% amid the prolonged conflict in the Middle East and escalating global fuel prices.

Speaking on TV Derana’s 360 programme on Sunday (1), Dr Weerasinghe said the conflict, initially expected to be short-lived, had continued longer than anticipated, generating significant economic repercussions for Sri Lanka.

He noted that rising global fuel prices were exerting upward pressure on inflation, adding that current inflation projections of around 5.4%-5.5% could climb further if prevailing conditions persist.

“We have observed a continuous increase in fuel prices, while consumer demand has not shown any significant decline. Therefore, there is a risk that inflation could move beyond 5% and even reach 7% if these conditions continue,” he said.

Dr Weerasinghe said the Central Bank had recently tightened its monetary policy as a precautionary measure to contain inflationary pressures.

He stressed that managing and reducing demand in the coming months would be crucial to preventing a sharper acceleration in inflation and safeguarding economic stability.