Sri Lanka’s foreign reserves inflated by approx. $ 1.4 b: FactCheck.lk

Monday, 16 June 2025 04:23 - - {{hitsCtrl.values.hits}}

New explainer highlights deviation from international standards in reporting reserves

The official foreign reserves figure reported by Sri Lanka is overstated by approximately $ 1.4 billion, a new explainer titled “FactCheck.lk reservations on Sri Lanka’s reporting of foreign reserves” has revealed.

The problem derives from including as reserves an RMB 10 billion (approximately $ 1.4 billion) currency swap from the People’s Bank of China (PBoC), which currently does not meet the international standard for what qualifies as a reserve asset.

The international standard for reserve asset reporting, as outlined in the International Monetary Fund’s (IMF) Balance of Payments Manual, 6th edition, requires that reserve assets be liquid, or readily available in the most unconditional form.

The PBoC swap fails to meet this requirement, as it is subject to conditionalities on usability—though these could be potentially removed in the future.

The inclusion of a non-reserve asset thus overstates Sri Lanka’s official reserves. For example, in May 2025, the reported official reserves were $ 6.3 billion. If the reporting was aligned with international standards, the figure would have stood around $ 4.9 billion.

This misreporting has been compounded by politicians and public officials using two different methods of counting reserves (PBoC swap excluded and PBoC swap included) to compare the increase in reserves from one point in time to another. This has resulted in misleading claims about the growth of reserves after April 2022.

The recommended approach—consistent with international standards—is to compare the change in what the IMF in its staff reports show as “usable reserves,” which excludes the swap and any such assets that do not meet the definition of a reserve asset.

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