Opposition MP Ravi Karunanayake on Wednesday called for an urgent government statement to Parliament on the integrity and usability of Sri Lanka’s Gross Official Reserves (GOR), raising concerns over foreign exchange leakages and regulatory consistency under the Foreign Exchange Act No. 12 of 2017.

Raising the issue under Standing Order 27 (i), Karunanayake urged the Government to provide a comprehensive disclosure on the composition, encumbrances and deployability of the country’s reserves, as well as on the Central Bank’s oversight of foreign currency transactions.

“Reserve credibility depends not merely on headline numbers, but on transparency, enforceability and consistency in regulation,” the MP told the House.

He sought clarification on the latest reported GOR figure and the net usable reserves after excluding encumbered assets, swaps and pledged balances. He also requested details of annual revenue earned on reserves from 2023 to 2025.

Following are the questions raised by MP Karunanayake:

1. What is the latest reported GOR figure, and what is the net usable reserve after excluding encumbered assets, swaps, and pledged balances? What is the revenue earned on are GOR 23-25 per year?

2. Provide a separate and detailed breakdown of GOR, including: (a) Monetary gold (quantity and valuation basis) is it real gold or gold paper? (b) Foreign currency assets by major currency and instrument; (c) SDR holdings; (d) IMF reserve position; (e) Foreign currency swaps, specifying counterparty type, principal amount, tenure, maturity profile, and all-in cost; (f) Domestic swaps, specifying amount, tenure, rollover terms, collateralisation, and effective cost.

3. Of the total reserves reported, how much is encumbered, swap-backed, or otherwise not immediately deployable for debt servicing or currency stabilisation?

4. What SLR spread, fee, or margin does the Central bank apply when buying or selling USD to the Government for reserve accumulation and external debt servicing and what total profit or gain has the C.bank realised from such transactions during the past three financial years? Advice per year.

5. Is the Central Bank subject to continuous and statutory audit by the Auditor General? If so, will the Government table the most recent audit report, specifying audit scope, sample size, reserve confirmations, swap verification and gold custody validation?

6. What triggered the recent circular warning domestic institutions on foreign currency transactions?

7. Has the C.bank quantified foreign exchange and tax revenue losses resulting from Sri Lanka-based businesses routing credit card and commercial payments through overseas payment gateways?

8. If domestic entities are regulated strictly, why has a binding circular not been issued against noncompliant business entities using foreign payment gateway arrangements that divert foreign exchange outside Sri Lanka’s regulated banking system?

The government asked for two weeks’ time to respond to the queries.

by Saman Indrajith