Sri Lanka’s Foreign Reserves Dwindle to $6.4 Billion as Imports Rise, Central Bank Anticipates Rebound

FINANCIAL CHRONICLE – Sri Lanka’s foreign exchange reserves have recently come under examination due to a decline in reported figures. Opposition politicians have accused the central bank of selling dollars to support the local currency, while monetary officials have attributed the drop to increased demand for imports.

Opposition MP Ravi Karunanayake highlighted that the gross official reserves fell from $6.8 billion to $6.4 billion, diverging from the International Monetary Fund (IMF) target of $8.9 billion set for the end of the year. “A decrease to $6.4 billion indicates that they are selling dollars to safeguard the rupee, which implies they are offloading dollars to avert depreciation,” Karunanayake stated.

In response to inquiries during today’s monetary policy review, Central Bank Governor Nandalal Weerasinghe explained that the reduction in reserves was primarily due to heightened import expenditures rather than any interventions aimed at stabilizing the exchange rate. He noted that monthly import costs have consistently exceeded $2 billion, peaking at $2.4 billion in one month.

Weerasinghe attributed the rise in imports to soaring international oil prices, increased vehicle and fuel imports—partly due to stockpiling by oil suppliers in April—and an overall expansion in imports driven by a credit growth rate of approximately 27 percent.

The Governor added that while import outflows have increased, significant foreign currency inflows are anticipated from multilateral lenders, which will enhance reserve levels. The central bank has recently received the fifth and sixth installments from the IMF, with expectations of additional contributions from the Asian Development Bank (ADB) and the World Bank.