Former United National Party Deputy Leader and Parliamentarian Ravi Karunanayake has warned that Sri Lanka could face significant challenges in meeting its foreign reserve targets as repayments on restructured debt begin.
Karunanayake said achieving the Government’s target of building official reserves to US$15.1 billion by 2028 would be a difficult task once debt servicing requirements increase.
He further warned that Sri Lanka is facing a serious balance of payments challenge and may have to seek another International Monetary Fund (IMF) programme to avoid the risk of a second sovereign default.
Although Sri Lanka’s official foreign reserves are reported at around US$6.59 billion, Karunanayake claimed that the figure includes funds that cannot be freely utilized.
He pointed to a US$1.4 billion equivalent currency swap facility with the People’s Bank of China, valued at 10 billion yuan, as well as short-term foreign exchange swaps with local commercial banks.
According to Karunanayake, after excluding such restricted or short-term facilities, Sri Lanka’s net international reserves that can be used without restrictions remain negative at around US$1.268 billion.
He warned that the gap between reported reserves and genuinely usable foreign exchange could become increasingly important as debt repayments resume and the Government attempts to meet its future reserve targets.
