Sri Lanka’s Dwindling Reserves Raise Alarm Over $7 Billion IMF Target

Sri Lanka is confronting a growing challenge in meeting its US$7 billion foreign reserve target for 2025, as stipulated under the IMF’s Extended Fund Facility program

. While gross reserves were US$6.53 billion in March, they have declined to US$6.04 billion by July, shrinking Sri Lanka’s buffer at a critical juncture

. More strikingly, net reserves (post-swap) fell from US$2.79 billion to US$2.21 billion, exposing the economy’s fragility

Opposition MP Kabir Hashim warned that despite initial gains from cautious monetary tightening, the downward trend signals a possible return to the instability of 2018, when rate cuts and liquidity injections triggered a currency crash.

The IMF commended Sri Lanka’s accumulation of US$6.5 billion in gross reserves by end-March, but emphasized that rebuilding external buffers remains an urgent priority

Skillfully closing the remaining US$960 million gap to the IMF target—while meeting looming external debt repayments—will require disciplined fiscal and monetary policy, as well as sustained foreign inflows. Failure to do so may delay IMF financing and weaken investor confidence

 

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