ECONOMYNEXT — Sri Lanka legislator Ravi Karunanayake has questioned the government and the central bank over the true usability and sustainability of foreign exchange reserves, warning that headline numbers are being artificially inflated through short-term domestic swaps.
Speaking in Parliament as the International Monetary Fund (IMF) program nears its December 2026 conclusion, Karunanayake sought clarity from the Minister of Finance on reserve composition, liabilities from forward contracts, and the actual liquid foreign currency available for import cover.
Official reserves, which stood around 6,100 million US dollars in September 2024, are currently reported at 6,491 million US dollars.
“Under the guise of building reserves in our country, it is like going to a bank and taking an overdraft — taking six-month domestic swaps to artificially prop up our reserves,” Karunanayake said.
Karunanayake called for clear institutional accountability, asking whether reserve creation is the statutory responsibility of the central bank or the Ministry of Finance.
He also requested projections for Gross Official Reserves and Net International Reserves through 2029, agreed IMF targets, and asked whether the government plans to re-enter the International Sovereign Bond (ISB) market.
The lawmaker also challenged forward guidance given by the central bank governor on August 12, which ruled out policy rate increases for the remainder of the year despite evolving inflation, currency, and capital flow conditions.
“How can a Governor of the Central Bank declare that there cannot be an interest rate hike for the remainder of the year? These are volatile matters; it is not a static operation,” Karunanayake said.
Karunanayake further called for transparency regarding the Central Bank’s 2025 net profits and remittances to the government, while asking if the state will activate the Active Liability Management Act to reduce debt servicing costs and support the rupee.(Colombo/Aug20/2026)