Tuesday, July 28 2026
Tuesday, July 28 2026
MONETABRIEF – Sri Lanka central bank has increased its buy-sell swaps by 421 million dollars up to April 2026 official data show, when the rupee came under pressure and collapsed to 335 to the US dollar, which was blamed on an 'external shock.'
Sri Lanka's rupee has steadily depreciated and the central bank's ability to build foreign reserves diminished in 2025 in the last phase of the International Monetary Fund program, due to a flaw in its design which allowed excess liquidity to build up.
From December to April the stock went up to 2,342 million US dollars.
When the central bank executes a buy-sell swap, money is printed for banks to give credit in a similar way inflationary open market operations work, pushing up excess liquidity which classical economists called super abundance of paper money.
When the banks use the money to give credit, artificial imports are generated outside current dollar inflows, triggering a balance of payments deficit.
If the central bank does not then return the dollars to importers to redeem the notes it issued when the swap was executed (dishonors the cheque), the rupee depreciates.
Separate from the buy-sell swaps the central bank had also transferred its profits to the banking system in the throes of the Middle East war.
If the profits are transferred to the Treasury as rupee and not as dollars, more imports would be generated, and interest rates artificially depressed.
In 2025 as the rupee fell from 300 to around 309 the central bank increased its outstanding buy-sell swaps from 1318 million dollars to 1,991 million dollars.
The central bank's market operations report said 258 billion rupees were created through swap transactions in 2025 the increase in domestic swaps was 603 million dollars. (Colombo/July28/2026)
| US Dollar | 340.98 | Sell - |
| Euro | 391.44 | Sell - |
| Japan Yen | 2.114 | Sell - |
| Sterling | 458.31 | Sell - |
| AED | 91.58 | Indi - |
| 3 month bill | 9.95 | 0.18 ▼ |
| 12-m bill | 10.20% | 0 - |
| Gold | $4035 | - - |
| ASPI | 21,199.37 | 49.8 ▲ |
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