Hon. Ravi Karunanayake

¶ 01 Mr. Speaker, under Section 26 of the Central Bank of Sri Lanka Act, No. 16 of 2023, and the policy framework thereunder, I seek a statement from the Government under Standing Order 27(2) regarding the continuous deviation from the targeted inflation rate.

¶ 02 Deviation Reports submitted by the Central Bank to Parliament confirm that headline inflation remained below the 5% target band’s lower bound (3%) for five consecutive reporting cycles—most recently, negative 1.1% in 2Q 2025 and 0.8% in 3Q 2025—triggering statutory reporting.

¶ 03 I request clarifications from the Hon. Minister of Finance on:

¶ 04 1. Despite substantial monetary easing of about 800 basis points since June 2023, why has headline inflation remained below the target band for five reporting cycles? How does the Government explain the disconnect between sub-3% inflation prints and the persistently high cost of living experienced by the public?

¶ 05 2. With GDP growth reported at 5% for the first nine months of 2025, does the Government accept that prolonged sub-target inflation indicates weaker-than-expected aggregate demand?

¶ 06 3. Earlier projections anticipated a quicker return to target, but current data suggest headline inflation will remain below 3% until at least 3Q 2026. Have medium-term inflation projections and modelling assumptions been revised?

¶ 07 Further, a member of the Monetary Board briefed the Public Finance Committee that key datasets available were as old as 2019 and raised data-quality concerns. If the Central Bank is to be independent, how can the Government function in this manner? There are serious questions about that independence.

¶ 08 4. Under the IMF’s Extended Fund Facility, to what extent has fiscal consolidation dampened demand and lowered inflation? Is the current policy rate of 7.75% appropriate in real terms? Will the 5% inflation target be revisited? You are effectively assuming a doubling of the cost of living over 10 years at 5%—do you accept that?

¶ 09 5. Under Act No. 16 of 2023, what is the constitutional relationship and division of responsibility between the Governing Board and the Monetary Policy Board? To whom is Parliament’s oversight directed? Who has been appointed to each body? How do these differ from the former Monetary Board under the old Act, especially the basis for excluding the Secretary to the Treasury from monetary decision-making?

¶ 10 6. Does the 2023 Act create a legal vacuum by not clearly articulating macroeconomic objectives beyond the medium-term inflation target—such as growth, employment, financial stability, adequacy of reserves, or external sustainability?

¶ 11 Finally, the Hon. Deputy Minister earlier said there was a debt standstill without Parliament’s approval. How did the Central Bank do that without Parliament’s sanction? Is this what is meant by independence?

¶ 12 7. When was the Consumer Price Index last rebased or updated, given concerns on its credibility raised at the Public Finance Committee? Is policy being made on outdated weights from 2019?

¶ 13 And, Mr. Speaker, per the Hon. Deputy Minister’s earlier answer: if this Parliament did not declare the country bankrupt, who did?