Member of Parliament Ravi Karunanayake has accused the government and the Central Bank of Sri Lanka (CBSL) of artificially inflating headline foreign exchange reserves through short term domestic swap arrangements.
Raising the issue in Parliament, the opposition lawmaker called for an immediate breakdown of Sri Lanka's reserve composition from the Minister of Finance to clarify the true amount of liquid foreign currency available for import cover and total liabilities tied to forward contracts.
Karunanayake claimed that relying on six month domestic swaps to boost reported reserves was equivalent to propping up finances with a bank overdraft.
He questioned whether the statutory duty of reserve creation rests with the Central Bank or the Ministry of Finance, while requesting official projections for Gross Official Reserves and Net International Reserves up to 2029 alongside agreed targets set by the International Monetary Fund.
He also asked whether the government intends to re-enter the International Sovereign Bond market to manage its foreign debt obligations.
The former Finance Minister also criticised central bank forward guidance issued on 12 August which ruled out policy interest rate increases for the rest of the year.
He said that a governor could not make such declarations given the volatile nature of inflation, exchange rates, and capital flows.
Karunanayake called for total transparency regarding the Central Bank's 2025 net profits and remittances to the state, while asking if the governemnt plans to activate the Active Liability Management Act to lower debt servicing costs and support the national currency.