Features

The Roots of Sri Lanka’s Foreign Exchange Crisis

Published

5 days ago

2026/10/11

Thilina Walpola

Can sustainable foreign reserves be built on borrowing?

by Professor Ranjith Bandara
Emeritus Professor of Economics,
University of Colombo

For decades, Sri Lanka has struggled to earn enough foreign exchange to meet the country’s needs and build lasting reserves. Earnings from exports and other sources have often fallen short of what is needed for imports and external payments. The shortfall then has to be met through borrowing. Borrowing helps meet immediate needs, but it also creates a cycle in which the country depends on debt instead of building reserves from its own foreign exchange earnings.

The latest decline in reserves brings this long-standing problem back into focus. A monthly figure alone cannot show whether a country can meet its external payments or how healthy its economy is. But it raises an important question: has Sri Lanka built a strong economy that earns foreign exchange, or does it still depend on borrowing, reserves and emergency restrictions to meet its needs?

In September 2026, Sri Lanka’s official reserves fell by 1.1%, from US$6,929 million to US$6,851 million. These reserves include funds from the foreign exchange swap facility with the People’s Bank of China (PBOC). Their use is subject to conditions. So, the reported total is not the same as the amount that can be freely used for any payment at any time. We need to consider not only the total, but also how much is available for use, how long it can cover imports, and how much debt must be paid in the coming period.

Reserves have recovered, but the economic base remains weak

Sri Lanka’s official reserves have risen at various times over the past five decades. But it has been difficult to keep them at a stable level. In 1970, reserves were about US$42 million. They reached about US$246 million in 1980, US$435 million in 1990 and US$1 billion in 2000. Reserves rose to about US$7.2 billion in 2010, but did not continue to grow steadily.

Reserves stood at about US$8.2 billion in 2014. They then fell to about US$7.6 billion in 2019, US$5.7 billion in 2020, US$3.1 billion in 2021 and US$1.9 billion in 2022. They recovered to about US$4.4 billion in 2023, US$6.1 billion in 2024 and US$6.8 billion in 2025. This recovery followed support from the International Monetary Fund, debt restructuring, import restrictions and the Central Bank’s foreign exchange purchases.

This history shows that reserves can rise, but Sri Lanka has not yet built a strong enough economic base to maintain them. Borrowing and import restrictions can improve the reserve position for a time. But if exports and other foreign exchange earnings remain weak, pressure returns when demand for imports and payments rises. The 2022 crisis should therefore be seen not simply as a sudden shock, but as the point when long-standing weaknesses surfaced together.

Spending more foreign exchange than we earn

Sri Lanka’s problem is not that it has no exports. Garments, tea, rubber products, spices, services, tourism and workers’ remittances all bring in foreign exchange. The problem is that these earnings are not always large or steady enough to cover imports and other external payments.

From January to August 2026, the trade deficit widened to US$7.2 billion. It was about US$4.3 billion during the same period a year earlier. Fuel imports alone cost about US$4 billion in those eight months, up 61.6% from the previous year. Vehicle imports cost a further US$1.684 billion. If export earnings do not grow at a similar pace, it is difficult to build reserves.

Money sent home by Sri Lankan workers abroad is an important source of foreign exchange. From January to August 2026, remittances reached US$6.1 billion, up 19.8% from a year earlier. Tourism earnings, however, were US$2.1 billion, down 10%. The surplus from services also fell by 21.4% to US$2.1 billion. Remittances increased, but the wider trade deficit and lower tourism earnings limited the benefit. The current account recorded a surplus in August, but a deficit of US$291 million over the first eight months of the year.

Is borrowing a solution or a way to delay the problem?

Taking a new loan to repay an old one can ease payment pressure in the short term. It can extend the time available to make a payment. But it does not earn new foreign exchange for the country.

If borrowed money is not used to increase exports, production or future income, the country may have to borrow again to repay the loan and interest. Borrowing then becomes a way to postpone the problem rather than a way to strengthen the economy.

Challenge of debt payments in 2027

When discussing foreign debt payments due in 2027, we need to consider more than international sovereign bonds. Other external debt obligations must also be counted. According to the IMF’s debt sustainability estimates, external debt service under foreign law is projected to be about US$2.4 billion in 2027, after restructuring. Total public debt service is projected at about US$9.9 billion. That figure also includes domestic debt, so it would be wrong to describe the full amount as a foreign currency payment. These are IMF projections. The payments are scheduled across the year; they are not all due at once.

It was also reported that, as of August 2026, potential short-term outflows that could affect reserves over the next 12 months were close to US$6 billion. About US$2.2 billion of this related to principal and interest payments on foreign currency loans, securities and deposits. This estimate includes more than government debt payments. It also covers other external obligations and financial positions. It should therefore not be confused with government debt service alone. But it does show the scale of the country’s overall foreign exchange needs.

Reports that international sovereign bond payments will resume in 2028 refer to a specific category of debt. They do not mean that Sri Lanka has no other external debt payments in 2027. We need to state clearly which debts are due, how much must be paid and when.

The central question is this: how will Sri Lanka earn enough dollars to meet debt payments, pay for essential imports and maintain its reserves? If export earnings and other foreign exchange income are not enough, another loan can delay a payment. It cannot solve the underlying problem.

Debt restructuring provides important relief. Sri Lanka must use the time it creates to build an economy that earns more foreign exchange. Otherwise, when debt payments rise again, the country may have to borrow once more.

Building an economy that earns foreign exchange

The answer is not to restrict all imports or borrow more just to raise the reported level of reserves. Export growth must become a long-term national priority. Sri Lanka should build on established industries such as garments and tea, while developing sectors that can earn more from each product or service. These include food processing, pharmaceuticals, information technology, professional services, shipping and logistics.

Taxes, regulations and licensing rules that affect exporters should be stable and clear. It should be easier for businesses to enter foreign markets and meet international quality standards. Ports and transport services must also work efficiently. These are all part of building exports.

Tourism policy should focus not only on the number of visitors, but also on how much each visitor spends in the country. Sri Lankan workers abroad should be able to send money home through formal banking channels easily, quickly and at low cost. At the same time, Sri Lanka needs stable laws, clear tax policies, confidence in property rights and strong institutions to attract foreign investment. Investment that creates jobs and export income should receive priority.

Sri Lanka should also reduce its dependence on imported energy. Investment in renewable energy and energy efficiency can reduce the foreign exchange spent on fuel imports. Debt, taxes and government spending must also be managed carefully. When domestic demand rises sharply, imports can rise too. This can put pressure on reserves even when the Central Bank is buying foreign exchange.

Building reserves is not the Central Bank’s task alone. The Central Bank can buy dollars in the market and add them to reserves, but the country must first earn a steady flow of foreign exchange. Budget, trade, energy, industry, tourism and investment policies must therefore work together.

Higher reserves are valuable. But it is even more important to build an economy that prevents them from being depleted again. The question facing Sri Lanka as debt payments fall due in 2027 is not only whether it can repay its debt. It is whether it can earn enough dollars to make those payments, pay for essential imports and maintain its reserves. Sri Lanka needs a productive economy that can earn the foreign exchange to repay debt and build reserves. More borrowing alone will not achieve that.

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Features

New US sanctions on ICC, a fillip to worldwide political repression

Published

24 hours ago

2026/10/15

Thilina Walpola

The International Criminal Court in session. UN Photo/Eskinder Debebe

US Secretary of State Marco Rubio’s warning to the International Criminal Court (ICC) was stark: ‘Either the ICC will end its threats, or we will end the ICC.’ It followed US central administration accusations that the court was unfairly targeting Americans on the basis of trumped-up war crimes charges.

However, a new plethora of sanctions has been clamped on the ICC by the US, which in turn has spurred accusations by sections of the world that the latter has unleashed an ‘assault’ on the international legal order.

What some of the sanctions would mean for the ICC was outlined by Rubio: ‘We will ban transactions with this rogue court, cutting off their resources and crippling their ability to operate against us.’

The ICC has shown consistency of purpose over the years. Despite some operational constraints it has indicted a large number of political strongmen from around the world, accused of war crimes and other governance excesses that come under its purview. Two such recent figures are: Russian President Vladimir Putin and Israeli Prime Minister Benjamin Netanyahu.

Rather than enjoy a mere nominal presence in the world community, the ICC has proved its effectiveness by detaining and bringing to justice scores of VIP politicians and others of their ilk who have been found guilty of human rights abuses and kindred excesses that come within the terms of reference of the ICC.

Accordingly, the international justice system would be stymied considerably as a result of the ICC being dis-empowered, particularly financially. Needless to say, potential and real perpetrators of the species of crime coming under the jurisdiction of the ICC would stand to gain most from such anarchic tendencies. That is, political repression globally would be enabled to enjoy a new lease of life.

A detailing of the types of crime coming under the purview of the ICC provides an idea of what it would cost the international community if the ICC’s operations are gravely hampered. They are mainly: genocide, war crimes, crimes against humanity and the crime of aggression.

That is, the part of the world to be worst affected would be the global South, since the latter is awash with the mentioned crimes. Needless to say, a chronically-disaffected South will sooner rather than later undermine the well being of the world dangerously. The world is already being put through these paces.

At the time of writing, ‘illegal migrants’ from the South, for example, are aggravating many a Western economy’s woes, besides creating for them acute law and order issues. The fact that these migrants’ presence goes on to become a virtual test of the migrant receiving states’ ability to forge domestic social inclusion in the face of jingoistic protests by mainly white supremacist groups is evidence of the latter. As is known, the US, to take just one example, has been up against this crisis for quite a while.

Accordingly, it will be in the best interests of the West if ‘illegal’ migrant arrivals on their shores are stemmed. If the socio-political and economic problems assailing the South are effectively managed through North-South collaborative, ‘trouble-shooting’ efforts the causes leading to ‘illegal’ migration and connected issues could be resolved at source as it were. For, it is the aggravation of the South’s material questions that lays the basis for the emergence of repressive and anti-democratic regimes in the hemisphere.

Until such time that the aforementioned issues in North-South relations are visited afresh and addressed urgently, a vibrantly functioning ICC would be needed. For, the latter would prove a deterrent to Southern political and military strongmen, highly prone to power abuse and like excesses, from coming into being in the wake of the South’s chronic material woes and the wars and conflicts that result from them.

It stands to reason then that the US would be acting in its own interests by enabling the ICC to perpetuate its mandate without hindrance. For a crop of issues that impinges negatively on internal law and order would be defused.

Meanwhile, there needs to be a meeting of minds among the rest of the West to put back in place a North-South dialogue process aimed at reducing some of the economic pressures that are weighing on the South.

Since economics usually drives politics it will be in the interests of the world community to scrutinizingly re-visit North-South issues of the past and put in place economic relief packages for Southern publics that would enable them to tide over their material hardships rather than permit the latter to aggravate into social disaffection and eventually armed militancy. It is the latter juncture that paves the way for the emergence of authoritarian rulers in the South who then go on to be a blight on their publics.

Accordingly, the Southern-based global development thinking of the past that envisaged a more equitable world economic order needs to be seen as an urgent need. That is, NAM’s international development paradigms need to be resuscitated to the extent possible.

It is unlikely that rightist governments of the West, such as the current Republican administration in the US, would find these projects feasible, but democratic states of Europe, led by perhaps the UK, are likely to think otherwise. For it would not be beneficial for the democratic world to be having on their hands repressive governments in the South who would be gravitating towards the major military and economic actors of the South, such as Iran and North Korea, who tend to be in constant power struggles with the West.

However, until such time that the mentioned, pro-people initiatives are given serious thought the ICC would need to be enabled by the international community to be in place comfortably and carry on with its mandate of bringing repressive rulers to book. Besides the ICC should pave the way for the peoples of the developing world to enjoy some substantial respite from the political repression and even terror which tend to be their lot.

Meanwhile, the wars of West Asia are relentlessly aggravating the economic hardships of people everywhere, driving the point home to enlightened sections that there is no alternative to peacemaking. A challenge is to convert the US under President Trump to this line of thinking.

Features

Clear, soft and shine-free skin

Published

24 hours ago

2026/10/15

Thilina Walpola

This week, I give you five simple, time-tested homemade remedies that help reduce the appearance of blemishes, control excess shine and leave your skin feeling softer and smoother.

The Honey and Lemon Brightening Dab:

For stubborn blemish marks, this is a classic. Mix one teaspoon of pure bee honey with three to four drops of fresh lemon juice. Apply gently, only on the affected spots, and leave for 10 minutes before rinsing with lukewarm water. While honey soothes and softens, lemon helps to brighten naturally. Use twice a week in the evening.

Besan and Rose Water Oil-Control Pack:

An ideal remedy to combat shine, especially on the T-zone. Take two teaspoons of besan (gram flour) and mix with sufficient rose water to form a smooth paste. Add a pinch of turmeric for its antiseptic goodness. Apply evenly, keep for 15 minutes and wash off. It absorbs excess oil without over-drying, leaving a beautiful matte finish.

Aloe Vera and Cucumber Ice Soother:

Blend fresh aloe vera gel with the juice of a grated cucumber and freeze the mixture in an ice tray. Each morning, wrap one cube in a soft muslin cloth and gently rub over a cleansed face for 30 seconds. It calms, tightens pores and imparts a baby-soft smoothness.

Oatmeal and Curd Gentle Polish:

Roughness and old blemish marks need gentle exfoliation. Combine one tablespoon of finely powdered oatmeal with one tablespoon of fresh curd (yoghurt). Massage very gently, in circular motions, for one minute, leave for five minutes and rinse. It removes dead cells and unveils softer, clearer skin.

Multani Mitti and Green Tea Magic Mask:

Brew some green tea and allow it to cool completely. Mix one and a half teaspoons of Multani Mitti (Fuller’s Earth) with the tea water to make a fine paste. Apply for 10 to 12 minutes – do not let it dry and crack completely – and wash off. It draws out impurities, fades blemishes and bestows a fresh, shine-free glow.

A Gentle Reminder:

As with any natural remedy, always do a patch test on your inner arm first. For those with oily or combination skin, avoid heavy coconut oil application and harsh scrubbing, as they tend to aggravate shine and blemishes.

Features

Compete, shine and be discovered at WCOPA 2027

Published

24 hours ago

2026/10/15

Thilina Walpola

Dream of performing on a world stage? Well, here is your unique, golden opportunity!

The World Championships of Performing Arts (WCOPA) — the one and only official “Talent Olympics” — is the world’s premier global platform for aspiring singers, dancers, actors, models, instrumentalists, etc., to compete, shine and be discovered!

And, yes, this world stage is open to YOU, Sri Lankans living in Sri Lanka and overseas!

Held annually in glittering Las Vegas, WCOPA brings together over 70 countries, all competing for Gold, Silver and Bronze Medals, just like the traditional Olympics.

Lakisha Bernard: Will represent Team Sri Lanka at WCOPA 2027

Outstanding performers vie for the coveted titles of Junior and Senior Grand Champion Performer of the World, with winners and standout participants awarded over $500,000 in scholarships, cash awards and prizes to catapult their education and careers!

Sri Lanka is already making waves! At WCOPA 2026, Natharie Wickramasinghe, representing Team Sri Lanka, made the nation proud by winning a Bronze Medal in the Ethnic/Folklore Dance category!

Lakisha: Accomplished freelance Model and Fashion Design graduate

Recruitment for this prestigious competition is handled through a system of scouts and licensed National Directors — and this is where our very own Chris Rajendra, now based in Las Vegas, and National Director for Team Sri Lanka, comes into the scene.

If you are a singer, dancer, actor, model, instrumentalist — if you have talent burning inside you — contact Chris Rajendra today for registration and, who knows, you may find yourself in Las Vegas, and proudly draped in the Sri Lankan flag, at WCOPA 2027!

The contact address is: Chris Rajendra, wcopa.nationaldirector.sl@gmail.com

or chris.rajendra@gmail.com

Meanwhile, a star is born for 2027, in the form of Lakisha Bernard who is all set to represent Team Sri Lanka at WCOPA 2027.

Originally hailing from the sun-drenched coastal city of Colombo and now carving out her creative career in Canada, 22-year-old Lakisha is stepping into the international spotlight.

This accomplished freelance Model and Fashion Design graduate has officially been appointed as the Team Sri Lanka Promoter for Canada as she prepares to represent Team Sri Lanka at WCOPA in Las Vegas.

Lakisha brings a unique blend of high-fashion sensibility, captivating camera presence and expert garment design to the Team.

Having built her career, from local college shoots to high-glamour concepts, Lakisha’s inspiring journey embodies the true spirit of cultural bridge-building and creative resilience, bringing immense pride and recognition to Sri Lanka on the global stage.

WCOPA 2027 will be held at the legendary Westgate Hotel & Casino, Las Vegas, from 12th to 20th July – the very same iconic arena where the late, great Elvis Presley himself performed!

Your moment is now. Your stage is Las Vegas, so hurry and contact Chris Rajendra.