MONETABRIEF – Sri Lanka's gross foreign reserves rose 219 million US dollars to 7,086 million US dollar by the end of October 2026, central bank data showed.
In October the central bank bought 191 million US dollars from the market.
Gross reserves can go up due to debt flows to the Treasury such as budget support or other loans.
The central bank can also engage in buy-sell swaps, create money and buy dollars.
Sri Lanka has been unable to build up reserves as fast as expected due to a return to inflationary policy from the beginning of the 2025 after the International Monetary Fund program removed a requirement to sell down central bank domestic assets.
Instead, excess liquidity has built up from reserves exposed to domestic credit, reducing interest rates out of line with reserves reported.
After US-Iran war broke out macroeconomists repudiated the note-issue and depreciated the currency and has triggered 8.3 percent inflation so far, mounting political pressure on the incumbent administration as has happened in the past.
There have been calls for the Treasury to buy dollars so that the central bank will not have an opportunity to build up excess liquidity, mis-target rates, dishonor notes at the slightest shock and undermine the credibility of a democratically elected government.
In 2026 the rupee was busted by dishonoring notes created from monetizing a balance of payments surplus as well as monetizing dollar balances of banks.
(Colombo/Nov07/2026)