By: Isuru Parakrama
April 21, Colombo (LNW): Sri Lanka’s foreign reserve position experienced a significant uplift in March 2025, marking a notable improvement in the island’s external finances.
This development follows the receipt of a key disbursement from the International Monetary Fund (IMF), alongside the Central Bank’s active intervention in the domestic currency market.
New figures reveal that the country’s gross official reserves climbed by US$ 431 million during March, elevating the overall total to approximately US$ 6.52 billion.
A major share of this increase stemmed from the arrival of the fourth instalment under the IMF’s Extended Fund Facility—a financial support arrangement designed to stabilise Sri Lanka’s economy in the wake of its severe debt crisis.
The tranche, valued at around US$ 334 million, forms part of a broader US$ 2.9 billion stabilisation package expected to extend through to 2027.
In tandem with IMF support, the Central Bank of Sri Lanka (CBSL) continued its focused effort to strengthen reserves through foreign currency absorption. Over the course of March, the Bank acquired a significant US$ 401.9 million from domestic banking sources without engaging in any parallel sales, a strategy intended to carefully manage the appreciation trajectory of the Sri Lankan Rupee.
This is a sharp rise compared to the net acquisition of just US$ 70.3 million recorded in February. Altogether, foreign currency purchases for the first quarter of 2025 have amounted to US$ 484.5 million.
Authorities have clarified that such monetary operations are part of a calibrated strategy to shield the rupee from appreciating too rapidly, which could disrupt the competitiveness of Sri Lankan exports and remittances.
Despite the Central Bank’s efforts, the rupee has experienced a mild depreciation of 2 per cent against the US dollar since the beginning of the year.
As of April 17, the currency held steady at an average exchange rate of Rs. 298.71 to the dollar, unchanged from the previous week but notably stronger than the Rs. 300.24 observed in April 2024.
The recent improvement in reserve accumulation also reflects broader macroeconomic dynamics. Overseas remittances have surged to their second-highest monthly level in recent history, providing a welcome buffer to the country’s foreign exchange position.
At the same time, tourist inflows have remained strong, bolstered by renewed interest in Sri Lanka’s travel sector and improved international perception of the island’s post-crisis stability.
Meanwhile, export performance, though challenged by fluctuating global trade conditions and the threat of new tariff regimes from key partners like the United States, has remained largely resilient. Revenue from other services, particularly in sectors such as logistics, IT, and professional consulting, has further supported the external account.
Whilst near-term headwinds remain—including the prospect of tightening external credit markets and persistent fiscal vulnerabilities—Sri Lanka’s ability to build up its foreign currency reserves in early 2025 signals cautious optimism.
