ECONOMYNEXT \u2013 Sri Lanka\u2019s foreign exchange reserves have not grown for several months and have shown a worrying tendency to fall, opposition legislator Kabir Hashim has told parliament.<\/p>\n
\u201cSri Lanka\u2019s foreign reserves have now fallen from the levels seen in October and November 2024,\u201d Hashim said.<\/p>\n
\u201cOur foreign reserves are not growing. It is a problem. President has said from time to time that we are saying things to frighten people. But this is the real situation.\u201d<\/p>\n
Sri Lanka\u2019s central bank has increased dollar swap transactions with banks, he said.<\/p>\n
However foreign reserves have not increased. <\/p>\n
In March 2025, gross official foreign reserves were 6,531 million dollars, but four months later in July 2025, reserves were down to 6,044 million dollars.<\/p>\n
Net reserves (after swaps) were down from 2,791 million dollars to 2,210 dollars, he said. <\/p>\n
The Central bank\u2019s net foreign assets have also fallen in June, he said. <\/p>\n
\u201cI am asking whether \u2018Is this not a red light? I appreciate the work the central bank has done up to now. <\/p>\n
\u201cI agree with Honorable Minister Anil Jayantha, that due to anti-inflationary measures, or deflationary measures, because monetary policy was done properly, we have been able to keep things under control. <\/p>\n
\u201cBut we made similar warnings during Gotabaya Rajapaska\u2019s time. That is why I said by December this could turn in to a crisis.\u201d<\/p>\n
Hashim was also a minister in a government from 2015 to 2019, when the central bank cut rates, enforced them with liquidity injections initially terminating sell-buy swaps (deflationary swaps), followed by inflationary open market operations triggered two currency crises.<\/p>\n
In the 2018 crisis, liquidity was also injected through buy-sell swaps, to keep rates down, discrediting the economic credentials of that administration at a time when taxes were raised to reduce the budget deficit and also fuel was market priced.<\/p>\n
Rates were cut for \u2018flexible\u2019 inflation targeting, claiming that past inflation was low and therefore interest rates could be cut as the private credit recovered.<\/p>\n
Taxes on gold was raised and restrictions were placed on vehicle import LCs\u2019 shattering the administration\u2019s free market credentials as the rupee collapsed, pushing up energy prices and triggering losses in energy utilities which also borrowed dollars as forex shortages emerged.<\/p>\n