Sri Lanka’s gross official reserves are likely to miss the International Monetary Fund’s end-2026 target of $ 8.8 billion by roughly around 19%, as the current account transitions into a deficit and the Central Bank faces challenges in maintaining its existing pace of reserve accumulation, First Capital Research (FCR) has projected.
Citing the last publicly available data for end-May, the unit noted: “Gross Official Reserves was recorded at $ 6.9 billion at the end of May 2026 amid wider trade deficit, external debt repayments and net foreign exchange sales by the CBSL.”
The research unit further noted that multilateral assistance has been unlocked. The IMF’s completed fifth and sixth reviews of Sri Lanka’s Extended Fund Facility (EFF) programme granted access to a disbursement of around $ 695 million, while the Asian Development Bank (ADB) allocated $ 480 million in “budget support” for Sri Lanka so far in 2026.
Despite this financial support, the Central Bank is expected to face headwinds in maintaining its current pace of reserve accumulation for the rest of the year.
“However, as the current account transitions into a deficit, the CBSL may face increasing challenges in maintaining its current pace of reserve accumulation. Accordingly, FCR estimates reserves at $ 7.25 billion, notably lower than the IMF’s estimate of $ 8.8 billion.”
Commenting on the status of Sri Lanka’s current account earlier this year, the research unit said: “In early 2026, the current account showed signs of stabilisation, with a modest improvement in the overall balance driven mainly by stronger remittance inflows, as overseas workers increased transfers to support families affected by Cyclone Ditwah, partially offsetting earlier deterioration.”
“Looking ahead, risks remain skewed to the downside. Continued instability in the Middle East could place further upward pressure on Sri Lanka’s import bill through higher energy prices,” the unit added.
Addressing the broader implications of the geopolitical situation for Sri Lanka’s export earnings, the unit said: “Meanwhile, export earnings may weaken due to reduced tea demand from the region. A potential slowdown in tourism and remittance inflows, both closely linked to the Middle East, could further strain the current account and overall balance of payments (BoP).”
The unit’s current account balance estimate for end-2026 stands at $ 19.5 million.