The Hon. Ravi Karunanayake

¶ 01 Okay, Hon. Speaker.

¶ 02 Sri Lanka’s official reserve assets stood at US Dollars 6.1 billion at the end of August, 2025, showing only a marginal increase from that of the previous month. Yet, under the Extended Fund Facility – the EFF – the IMF and the Government are committed to push the reserves up to US Dollars 7.2 billion by December, 2025. This implies an increase of over US Dollars 1.1 billion within four months, a target that raises critical questions about feasibility, sustainability and the real cost to the people.

¶ 03 The Central Bank, operating with newfound independence, must strike a delicate balance: reserve accumulation through genuine inflows such as exports, remittances, tourism and FDI versus temporary fixes such as external borrowing, swaps or “hot money” inflows.

¶ 04 There is a very real concern that reserves could be boosted through short-term financial engineering rather than durable inflows, thereby creating an illusion of stability while pushing up interest rates, raising the cost of credit and strangling small and medium enterprises – SMEs – and households already burdened by a high cost of living. Therefore, Parliament has the duty to probe whether this reserve target reflects a true path to recovery or merely a cosmetic exercise to please external lenders.

¶ 05 Will the Hon. Minister of Finance inform this House of the real situation facing the country?

¶ 06 1. What concrete measures has the Central Bank identified to raise reserves from US Dollars 6.1 billion to US Dollars 7.2 billion within the next four months and how much of that will come from genuine inflows – exports, remittances, tourism – versus fresh borrowings? 2. Will the Central Bank rely on short-term external borrowing or currency swaps to temporarily inflate reserves to meet the IMF target, and if so, what are the repayment risks in 2026-2027? Will there be an uncertainty created for the International Sovereign Bond – ISB – holders who seek Government guarantees to be given to them, especially when macro-linked bonds have been issued? 3. How much of reserve buildup is expected from non-borrowed sources such as increased tourism receipts and remittances, and are there credible projections to support these figures? 4. Given that Sri Lanka’s import bill remains significant, will part of the reserves target be achieved through import compression and if so, would that not risk damaging economic recovery and consumer welfare further? 5. Is there an intention to raise policy interest rates again to curb imports and protect reserves, despite the harmful impact it will have on small and medium enterprise financing, employment and overall growth? 6. Has the Central Bank considered that artificially strengthening reserves through swaps, IMF tranches or bilateral loans creates a “reserve illusion”, where gross reserves look stronger than the net usable reserves actually available? 7. Will the Central Bank commit itself to publishing a transparent breakdown of gross versus net usable reserves, including forward liabilities, swaps and repayments so that Parliament and the people know the true reserve position? 8. What contingency plans are in place, if the US Dollars 7.2 billion target is not achieved by December, 2025? Will Sri Lanka face additional IMF conditionalities, credibility damage in markets or further tightening of domestic policies? 9. Will the Central Bank resort to attracting speculative “hot money” inflows – short-term portfolio investments in government securities – merely to camouflage the reserve gap and if so, how will the authorities mitigate the high risk of sudden outflows which could destabilize the economy further?

¶ 07 The reason why I ask that, Sir, is because last week, the Central Bank said that they had bought reserves worth Rs. 1,100 billion. But, at the end of the day, the net reserve is only US Dollars 150 million.

¶ 08 Thank you, Sir.