Sri Lanka's foreign currency reserves increased by 2.1 percent to $6.59 billion in July as the Central Bank continued aggressive dollar purchases to meet IMF commitments and prepare for upcoming debt repayments.
Sri Lanka's foreign currency reserves grew to $6.59 billion by the end of July, up from $6.45 billion the previous month, according to official data. The Central Bank net purchased $348.6 million during July as part of its strategy to bolster reserves. Since the start of 2026, the institution has accumulated $905 million through similar purchases, building on net acquisitions of $2 billion in 2025.
The Central Bank's reserve-building efforts are directly tied to Sri Lanka's commitment under a $3 billion International Monetary Fund Extended Fund Facility program. Maintaining adequate reserves is essential for meeting IMF performance criteria and addressing external debt obligations, particularly as the country prepares for sovereign bond repayments scheduled to begin in April 2028. Officials have indicated that reserve adequacy is critical to sustaining the recovery trajectory and normalizing relations with international markets.
Currency stability remained a key concern, with the rupee facing downward pressure earlier in the year. In May, elevated fuel import costs resulting from Middle Eastern tensions and sustained demand for vehicle imports pressured the currency, prompting the Central Bank to raise its overnight policy rate. To further discourage vehicle imports and preserve foreign exchange, the government extended a 50 percent customs surcharge on new personal vehicles through December 31, originally scheduled to expire on August 15.
Market conditions showed signs of stabilization in mid-August. The rupee strengthened to 332.75/95 against the dollar, while bond yields declined across multiple maturity dates, suggesting investor confidence. Financial sector performance also reflected positive momentum, with the Colombo Stock Exchange's benchmark index rising 0.49 percent on August 14 and several financial institutions reporting improved profitability.
