Central Bank of Sri Lanka Governor urges building foreign reserves

At the inaugural Reserve Management Conference in Colombo, Central Bank of Sri Lanka Governor Dr. Nandalal Weerasinghe urged reserve managers to build foreign exchange buffers during stable periods to prepare for future volatility. He noted that the global landscape for reserve management has changed due to geopolitical fragmentation, sanctions, and rapid technological shifts.

Drawing on Sri Lanka’s 2022 economic collapse as a cautionary example, Weerasinghe explained that critically low reserves constrain imports, complicate debt servicing, and erode economic confidence. He emphasized that reserves provide a country with the time necessary to respond to crises.

While acknowledging that Sri Lanka’s external sector has strengthened through macroeconomic stabilization and structural reforms, the Governor warned that recovery is not linear and that external shocks can quickly deplete accumulated buffers. He advised against accumulating reserves at any cost, noting that excessive market intervention or reliance on foreign borrowing could lead to inflation or future debt obligations.