Sri Lanka’s gross official reserves target of $ 8.6 billion (b) agreed under the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) programme cannot be reached this year, as it is unrealistic in the current economic circumstances and the current reserve position is built with domestic swaps, Committee on Public Finance Chairperson Dr Harsha de Silva said on Monday (8), speaking on Ada Derana 360.
“This is not realistic. We cannot expect the next six months to get any better than the last six months. Within those reserves maintained now, there is more than $ 2 b in reserves that are the result of domestic swaps. The only swap that is spoken of is the Chinese swap,” de Silva said, referring to the IMF’s expectations for Sri Lanka for end-2026 and 2027.
According to its expectations published with the conclusion of the Fifth and Sixth review in May, the multilateral outlined that by the end of the year, Sri Lanka is to have $ 8.6 b in gross official reserves, a target revised down from its projected $ 11 b by the end of 2026. Further, it outlines that Sri Lanka’s end-programme target in 2028, is a reserve position of $ 13.9 b.
Based on the Central Bank of Sri Lanka’s latest report, Sri Lanka’s gross official reserves that were at $ 6.7 b towards the end of April, had risen by 1.6% to $ 6.8 b in May. In its Weekly Economic Indicators report released last week, the CBSL stated that the current reserve position includes the People’s Bank of China swap facility proceeds too.
“The gross official reserves were provisionally estimated at $ 6,873 million as at end May 2026. This includes proceeds from the People’s Bank of China (PBOC) swap arrangement,” the report stated.
“Within those reserves maintained now, there is more than $ 2 b in reserves that are the result of domestic swaps. Unlike those, the only swap that is spoken of is the Chinese swap,” de Silva said. That needs to be deducted from the $ 6 and $ 8 b,” de Silva said, speaking on the television programme.
In 2024, the Central Bank of Sri Lanka and the People’s Bank of China renewed its Bilateral Currency Swap agreement signed in 2021, for an extended period of three more years, making the CBSL responsible for returning the roughly $ 1.4 b (CNY 10 b) currency swap facility to the People's Bank of China (PBoC) by end 2027.
“There are other swaps that have been done with other Central banks; and there is more than $ 2 b in reserves from domestic swaps. Domestic swaps are temporary additions, these do not belong to us. These do not add to Net International Reserves,” de Silva said.
“In the agreement with the IMF, the target for Gross Reserves was $ 14 b, by the time the programme ends. Now it has been revised because that is not realistic. So if there is a need for that $ 8 b to be reached this year – there is no way this can be reached. My belief is that this cannot be achieved.”