Samagi Jana Balawegaya MP Harsha de Silva warned Parliament on Thursday that the Central Bank of Sri Lanka may raise interest rates by at least 50 to 100 basis points next week, a move he said would directly increase the tax burden on the public.
The economist MP told the chamber that any such rate hike would translate to an increase of 0.5 to 1 percentage point, and cautioned that monetary tightening at this stage could deepen the ongoing economic cycle and undermine financial stability.
He urged the Ministry of Finance, the Central Bank and the Treasury to adhere to “proper market policies” and act responsibly. Failure to do so, he said, risks compounding the rupee depreciation already unsettling markets this month.
The rate hike alarm is the third major economic warning de Silva has delivered in 24 hours. Earlier on Thursday he told Parliament the foreign exchange market is effectively frozen, with no bid or offer prices and the Central Bank functioning as the only counterparty. He has also warned of a “vicious cycle” in which exporters withhold dollars while importers rush to settle in advance of further depreciation.
The Central Bank’s next monetary policy decision is widely expected next week, days before the IMF Executive Board considers the combined Fifth and Sixth Reviews of the Extended Fund Facility on May 27.
A rate hike to defend the rupee would mark a sharp pivot. The CBSL has held its standing lending and deposit facility rates steady through 2026 even as the rupee weakened, with Governor Nandalal Weerasinghe attributing the slide to global factors rather than domestic pressures. Deputy Finance Minister Anil Jayantha Fernando on Thursday rejected the framing that the rupee fall constitutes a crisis.
