ECONOMYNEXT – Sri Lanka has recorded a 1.7 billion US dollar surplus in the current account in 2025, official data show, indicative of net outflows through the financial account for debt repayment.
In December the surplus in the current account was 45 million US dollars and down from 92 million dollars a month earlier.
The current account is a mirror image of the financial account (subject to errors and omissions).
Sri Lanka has been repaying debt with the central bank itself repaying loans taken from the International Monetary Fund relating to a currency crisis triggered by rate cuts enforced with inflationary open market operations in 2015 and loans from India taken after rate cuts in 2020.
The central bank has operated a broadly deflationary policy through coupons paid into its bond portfolio allowing reserves to be collected while a small amount of bonds were allowed to expire.
The central bank also sold dollars to the government for cash in an unsterilized peg defence, allowing some current inflows to turn into financial account outflows.
Analysts have called for the Treasury to buy dollars to repay debt (importers bought 21.4 billion US dollar in 2025 while the Treasury struggles to get one or two billion dollars to repay debt and defaults) ending monopoly privileges given to the central bank and its inflation bias.
RELATED :
Sri Lanka Treasury should buy its own dollars to settle debt and avoid second default
Sri Lanka need not be a forex beggar nation, Treasury should charge dollar taxes
Analysts have also called for the Treasury to charge dollar taxes ending a so-called ‘Government Acceptance’ privilege given to central banks by Western monarchs so that a default can be prevented.
The rupee however depreciated in 2025 due to unsterilized purchases of dollars by the central bank exceeding unsterilized sales and deflationary policy.
If liquidity from dollar purchases, which the central bank’s founding Governor called ‘monetization’ of a balance of payments surplus, are unsterilized, dollars have to be returned at the same rate as it was purchased from the people to prevent depreciation. (Colombo/Jan03/2026)