Ravi warns $ 7.2 b reserve target hurts households

Saturday, 13 September 2025 00:31 - - {{hitsCtrl.values.hits}}

UNP MP Ravi Karunanayake

UNP MP Ravi Karunanayake yesterday told Parliament that Sri Lanka’s plan to raise foreign reserves to $ 7.2 billion by December 2025 under the IMF’s Extended Fund Facility could place additional burdens on households and small businesses.

He noted that official reserves stood at $ 6.1 billion at the end of August, leaving $ 1.1 billion to be built up within four months. Karunanayake questioned whether the increase would come from exports, tourism, remittances, and foreign direct investment, or from short-term borrowing and speculative inflows that he warned could create a “reserve illusion.”

He cautioned that temporary financial engineering could raise interest rates, restrict credit to SMEs, and worsen conditions for families already struggling with high living costs. He also urged the Central Bank to publish a clear breakdown of gross and net usable reserves, including forward liabilities and swap obligations.

Karunanayake added that measures such as import compression or tighter monetary policy to protect reserves could hurt growth and consumer welfare. He pressed the Finance Minister to outline contingency plans if the $ 7.2 billion target is not met, warning that failure could bring further IMF conditions and credibility risks.

He said Parliament must ensure the target reflects a genuine recovery path rather than a cosmetic exercise to satisfy external lenders.