Sri Lanka’s external financial account recorded a deficit of USD 610 million, according to Central Bank data, as the country prioritized debt repayments and reserve accumulation amid constrained capital inflows.
Despite a USD 938 million surplus in the current account in Q1, the financial account remained in deficit due to repayment pressures and reduced foreign inflows. An additional USD 327 million in errors and omissions—a balancing figure in BoP accounting—was adjusted against known reserve movements.
Since late 2022, Sri Lanka has been operating under a tight monetary regime aimed at maintaining stability without excess money printing. However, in Q4 of 2024, the current account slipped into deficit following increased liquidity injections and debt payments supported by budgetary loans.
Analysts warn that premature rate cuts based on backward-looking inflation data could lead to reserve depletion and potential re-default, echoing past crises in 2012, 2015, 2018, and 2020.
The developments highlight the ongoing tension between Keynesian demand-driven policies and classical monetary discipline, as Sri Lanka navigates its post-crisis economic recovery while maintaining external stability.
