Domestic macrofinancial conditions strengthened further in 2025, supporting continued credit expansion, although external vulnerabilities remained a concern. Credit growth accelerated markedly, with total credit extended by banks and Finance Companies (FCs) rising by end 2025. The financial sector’s exposure shifted further toward the private sector, driven by strong private sector credit growth, while exposure to the public sector contracted reflecting ongoing fiscal consolidation. Despite the decline, government related exposure remains sizeable. Financial intermediation improved, as reflected by the continued rise in the banking sector’s credit to deposits ratio.

Sri Lanka has successfully completed the National Risk Assessment (NRA) 2024/25 on Money Laundering (ML), Terrorist Financing (TF) and Proliferation Financing (PF), in collaboration with a total of 86 governmental organizations, regulatory bodies and private sector institutions. Around 200 experts from these institutions contributed to this mammoth national task. This is the country’s third NRA and under this assessment, it was aimed at identifying the ML/TF/PF risks in the country. The assessment highlights the most significant ML/TF/PF threats, vulnerabilities, and the overall risk faced by Sri Lanka.