According to official data, Sri Lanka’s foreign exchange reserves dropped by 3.3% in June, settling at $ 6 billion – half a billion less than what the Wickremesinghe regime handed over in September last year. Nevertheless, beneath this seemingly stable figure lies a critical caveat: $ 1.5 billion is tied up in a Chinese currency swap, effectively rendering it unusable under current economic conditions. This leaves Sri Lanka with $ 4.5 billion in actual, deployable reserves.
This $ 4.5 billion isn’t merely a statistic; it represents the nation’s ability to import what it needs like food, medicine, fuel, gas, spare parts, and more. Further depletion, therefore, could be problematic. It was precisely the depletion of this reserve base in 2022 that triggered the worst economic crisis in Sri Lanka’s post-independence history. The warning signs may not be flashing as brightly, but given past experience, depleting reserves is something to be taken seriously. The fact that nine months down the line forex reserves are headed in the opposite direction points to the need for course correction or court catastrophe.
At the very minimum, the Government must recognise the dangerous disconnect between rising imports and falling export revenue with the Trump tariffs looming large on the horizon. While the Government appears determined to project an image of frugality, reality on the ground tells a different story. Luxury vehicle imports are flooding Sri Lanka’s ports, while at the same time the country’s most crucial foreign exchange earners are under threat.
Tourism, long considered the cornerstone of recovery, is clearly underperforming. Latest data suggests that Sri Lanka may close 2025 with around 2.5 million tourist arrivals – well short of the three million target. Meanwhile, apparel exports to the US face growing uncertainty amid shifting global demand and stiff regional competition. To make matters worse, Sri Lanka is now importing even basic food items like rice, salt, coconuts, and even eggs for the first time, expending precious forex. This not only places additional pressure on the reserves, but also raises troubling questions about food security, agricultural policy, and overall economic direction.
As Sri Lanka’s production costs spiral upward, the nation’s ability to compete in global markets is being quietly but steadily eroded. Electricity and utility prices are among the highest in the region. So too are the recently increased wages – understandable from a social standpoint, but economically challenging when not paired with productivity gains or reductions in other input costs.
India, a key competitor in the apparel sector, has taken decisive steps in the opposite direction. According to reports, India has already reached 50% non-fossil energy generation, five years ahead of its 2030 target. This means India is producing cheaper, cleaner electricity, and in doing so, offering globally competitive production costs. That edge is fast becoming a strategic advantage that Sri Lanka simply cannot match under current policies.
The Ceylon Electricity Board (CEB), rather than expanding grid capacity or incentivising renewables, has been systematically discouraging solar power generation. Feed-in tariffs have been slashed and those who invested in domestic units will now have to wait much longer to recover their costs. Besides, rooftop solar contributors are routinely asked to disconnect during low-demand periods in order to prevent ‘system overload’ that has already resulted in multiple crashes. If the grid is too fragile to handle green energy, the solution is surely to modernise the grid and not stifle clean, affordable power generation. The bottom line is that Sri Lanka’s energy crisis is no longer technical. It is political and bureaucratic, allowing vested interests and outdated thinking to hold hostage a sector that should be driving economic recovery.
In the midst of this economic uncertainty, the Government has made a point of highlighting its perceived austerity, particularly regarding the salaries and benefits for its 159 Members of Parliament. But, as always, the devil lies in the details.
The recent disclosure of a salary slip by Samagi Jana Balawegaya (SJB) MP Jagath Withana was quite intriguing. Although the ruling National People’s Power (NPP) MPs are said to have relinquished their salaries, these funds – amounting to nearly Rs. 50 million each month for 159 members – are credited to the party’s bank account. In other words, the claim that ‘NPP MPs don’t take salaries’ is misleading. The money is still paid, just redirected. Since November last year, that account should have received around Rs. 400 million in taxpayer funds.
More intriguing is the mysterious reduction in MPs’ tax liabilities. Withana’s salary slips appear to show that personal income tax on a gross monthly salary of Rs. 351,000 dropped from Rs. 18,100 prior to 1 April to a mere Rs. 4,000 from 1 April. Such a significant change, especially at a time when ordinary citizens are facing historic tax burdens, smacks of privilege and goes against what the NPP has been pontificating. While ordinary citizens are being asked to tighten their belts, the political elite appear to be discreetly loosening theirs. Such hypocrisy is corrosive. It weakens public trust, undermines democratic accountability, and usually widens the chasm between the governors and the governed.
Nowhere is this erosion of trust more apparent than in the realm of transparency. The NPP, while in Opposition, championed openness. The party held previous administrations accountable, demanded disclosure of public salaries, and fought for the right to information. But now, in power, the party appears to have forgotten what it used to fight for. Take the Presidential Secretariat’s recent refusal to disclose staffing information in response to a Right to Information (RTI) request. This is the same office that was scrutinised in great detail by the NPP when in Opposition. It seems that the promised system change is changing for the worse.
The RTI Commission itself, a hard-won institutional safeguard, is being steadily undermined. It has been without a chairperson for the past three months, leaving it dysfunctional. Given this lethargy on the part of the administration, it’s beginning to look like a broader pattern of centralising control and restricting oversight.
Such an assessment is vindicated by the disconcerting secrecy surrounding various bilateral agreements entered into by the current regime, especially the seven signed with India recently, among which is a defence Memorandum of Understanding (MOU), the contents of which remain unknown not just to the public, but even to Parliament. In a democracy, agreements that touch on national security, economic sovereignty, and identity infrastructure cannot and should not be shrouded in opacity. The people have the right to know.
This trend of secrecy even pervades the decision to outsource Sri Lanka’s new National Identity Card system to an Indian company. Just a year ago, it was none other than the current President who passionately opposed the move citing national security risks. Don’t such extreme policy reversals erode public trust? When the NPP swept into power, it did so on the promise of radical change. Transparency, accountability, and integrity were the cornerstones of its mandate. But those promises are now unravelling at an alarming rate.
The people were told there would be relief. Instead, they are being taxed to the hilt. They were told the political culture would change. Instead, perks and privileges have simply been rebranded, not removed. They were told power would be clean, green, and affordable. Instead, it remains expensive, mismanaged, and monopolised.
The problem is not just broken promises. It is the betrayal of hope. Sri Lankans believed for the first time in years that a new era was possible. That faith is now being tested. With debt repayments set to resume in under 30 months, Sri Lanka is running out of time and running out of credibility and the people are running out of patience.
Sri Lanka urgently needs substantive reforms in key economic sectors, most notably the energy sector. It needs to protect its export base with smarter policies, not knee-jerk restrictions or cosmetic reforms. Sri Lanka needs to invest in domestic agriculture and food security to avoid squandering precious dollars on imports. Above all, the people must know what is going on. It is their right. They are no longer buying into carefully choreographed press conferences or half-answers in Parliament.
The people are not asking for miracles; just the honesty and competence they were promised. It is not too late. Start with full disclosure of bilateral agreements, staff salaries, MP benefits, and tax arrangements, and restore the integrity of the RTI Commission.