Foreign Reserves Growing Despite Vehicle Imports and Debt Repayments - Minister

COLOMBO (News 1st); Deputy Minister of Finance and Planning Dr. Anil Jayantha says Sri Lanka has been able to build its foreign reserves faster than anticipated while simultaneously supporting economic activity, repaying debt and easing import restrictions.

Speaking on the country's reserve position, Dr. Jayantha noted that even the International Monetary Fund had revised downward the reserve targets initially projected for Sri Lanka in 2023 due to the progress made through the Government's economic measures.

"Even the International Monetary Fund reduced the reserve targets that Sri Lanka was expected to achieve in 2023 because of the steps we took and the manner in which we released reserves to support economic activity."

He pointed out that there had been no provision for vehicle imports in 2022 and 2023, but the Government later decided to relax restrictions to support economic recovery.

"For example, there was no allocation for vehicle imports in 2022 and 2023. After we allowed vehicle imports, letters of credit have now been opened to the value of around USD 3.5 billion. If those imports had not been permitted, our reserves would have been higher by that amount."

The Deputy Minister also highlighted that Sri Lanka has continued meeting its external obligations while rebuilding its reserve position.

"We have repaid debt amounting to USD 2.6 billion. Despite these outflows, we have managed to maintain foreign reserves at around USD 6.6 billion, while allocating significant amounts of reserves for imports."

He added that fuel imports also continue to place pressure on the country's foreign currency reserves.

"We also have substantial reserve outflows for fuel imports, which are costs that cannot be avoided or controlled in the same way."

Dr. Jayantha emphasized that foreign reserves should be viewed primarily as a protective buffer rather than the sole measure of economic performance.

"Foreign reserves are a safeguard, not the only yardstick used to measure an economy. We are building this buffer while keeping economic activity alive and without stifling growth."

He further stated that the key target for Sri Lanka is the growth of net foreign reserves and that progress in this regard has been achieved through prudent Central Bank management and measures aimed at ensuring financial sector stability.