Foreign reserves fall by US$ 295mn in April as war-driven oil shock pressures external sector

• Gross official reserves slip to US$ 6.75bn in April amidst rising import costs and slowing tourism receipts
• Central Bank turns net seller in the foreign exchange market for the first time in months
• Foreign holdings in government securities remain broadly stable despite external sector vulnerabilities

Sri Lanka’s foreign currency reserves fell by US$ 295 million in April, reflecting mounting pressure on the country’s external sector from higher oil import costs and slowing inflows from exports and tourism as the Iran war disrupted global trade and energy markets. Central Bank data showed foreign currency reserves declined to US$ 6.50 billion at end-April from US$ 6.80 billion a month earlier.

 Meanwhile, total official reserve assets stood at US$ 6.75 billion. The reserve assets included gold holdings worth US$ 219 million and Special Drawing Rights amounting to US$ 32 million.

The decline came as Sri Lanka’s import bill for fuel surged amid elevated global oil prices. Latest available trade data showed the country spent US$ 308.9 million on petroleum product imports in the first quarter of 2026, up 19.3 percent from US$ 259.0 million in the corresponding period of 2025, with prices remaining significantly above pre-war levels.

At the same time, foreign currency inflows showed signs of softening. Export growth recorded a 3.4 percent increase to US$ 3.46 billion in the first quarter as demand conditions weakened amid the conflict. Tourism earnings fell to US$ 223.7 million in March from US$ 354.0 million a year earlier. Tourism inflows for the first three months of the year declined 15.0 percent year-on-year to US$ 954.0 million.

The pressures also weighed on the local currency, which has recorded a year-to-date depreciation of 3.6 percent against the US dollar as of May 08. The dollar selling rate reached Rs. 325.53 last Friday for the first time since January 2024.

Reflecting tighter foreign exchange conditions, the Central Bank turned a net seller of dollars in April for the first time in months, selling a net US$ 12.9 million to the domestic market, compared with net purchases of US$ 48.8 million in March. The figure marked a sharp slowdown from the US$ 461 million purchased on a net basis in February, before the conflict intensified.

The reserve decline points to renewed strains in Sri Lanka’s macroeconomic fundamentals, driven largely by higher global energy prices and moderating foreign inflows, although worker remittances have remained resilient. Despite these external vulnerabilities, foreign appetite for local government debt has held steady. 

The rupee value of Treasury Bills and Treasury Bonds held by foreign investors remained broadly stable compared to the previous week. Outstanding government securities held by foreigners rested at Rs. 142.73 billion for the week ending May 07, compared to Rs. 144.20 billion the week prior.

Sri Lanka entered its 2022 economic crisis after usable reserves dwindled to critically low levels, as remittance inflows weakened and tourism earnings collapsed amid political unrest, fuel shortages and power cuts.