Foreign reserves are not the sole metric for measuring a nation's economic strength, as reserves serve as a self-insurance mechanism that fluctuates according to periodic requirements, Minister of Labour and Deputy Minister of Finance and Planning Dr. Anil Jayantha said.
Speaking in Parliament during the parliamentary debate on resolutions under the Finance Act, he addressed criticism regarding the adequacy of Sri Lanka's current reserve position by noting that even the International Monetary Fund (IMF) scaled back its initial reserve accumulation targets for Sri Lanka in 2023.
Reserves maintained despite major dollar outflows
The Minister said that the government deliberately released foreign exchange buffers to support essential economic activity, citing the recent decision to permit vehicle imports as a key example.
He revealed that while no provisions were allocated for vehicle imports in 2023, the government's decision to reopen the market resulted in letters of credit worth USD 3.5 billion being opened to date.
Had those funds remained unspent in state coffers, the total official reserves would have expanded by an equivalent USD 3.5 billion.
He also emphasised that despite settling a debt obligation of USD 2.6 billion alongside these major import expenses, the government successfully maintained gross official foreign reserves at USD 6.6 billion.
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