Sri Lanka’s foreign exchange reserves have become the centre of a heated economic dispute after opposition parliamentarian and former Finance Minister Ravi Karunanayake accused authorities of secretly using foreign currency holdings to prevent the Sri Lankan Rupee from weakening.
Karunanayake has challenged the Central Bank of Sri Lanka’s explanation that the recent decline in reserves was mainly caused by higher import payments and external debt obligations. He argues that the fall in gross official reserves from around USD 6.8 billion to USD 6.4 billion indicates that dollars are being released into the market to artificially support the currency.
“Dropping it to 6.4 billion suggests that they are selling dollars to protect the rupee—meaning they are selling off dollars to prevent depreciation,” Karunanayake claimed, questioning whether the current exchange rate stability can be maintained without damaging the country’s reserve position.
The opposition figure warned that the decline places Sri Lanka further away from the International Monetary Fund’s year-end reserve target of USD 8.9 billion. According to his argument, maintaining the Rupee near the 336 level against the US dollar through interventions could create a larger adjustment problem in the future if reserves continue to fall.
Karunanayake has also repeatedly demanded greater transparency from monetary authorities regarding the composition of reserves. He has called for detailed disclosures separating usable reserves from funds that may be restricted or already committed, arguing that headline reserve figures alone do not provide a complete picture of Sri Lanka’s foreign exchange strength.
However, the Central Bank strongly rejects these allegations. Governor Dr. Nandalal Weerasinghe has maintained that the reserve decline does not reflect dollar selling to defend the Rupee. Instead, he attributes the movement to increased import expenditure, particularly higher fuel costs, vehicle imports, and continuing external debt servicing requirements.
The Central Bank says Sri Lanka remains a net buyer of foreign currency and reported a net purchase of USD 70.5 million in June. During the first half of 2026, the monetary authority accumulated hundreds of millions of dollars as part of efforts to rebuild reserves under the IMF-supported programme.
Economic analysts note that reserve movements must be viewed alongside trade patterns, debt payments, remittance inflows, and export earnings. Monthly imports exceeding USD 2 billion have placed pressure on foreign currency availability, while energy-related costs and renewed vehicle demand have widened the trade imbalance.
Despite the political controversy, the Central Bank maintains that the Rupee’s stability is supported by stronger worker remittances, export earnings, and improved market confidence rather than artificial intervention.
The dispute highlights a wider question facing Sri Lanka: whether recent currency stability represents genuine economic recovery or temporary protection achieved at the expense of future reserves.
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