📈 Sri Lanka Faces $5.5 Bn Reserve Gap Ahead of 2027 Debt Servicing

• Debt Obligations: Annual external debt servicing will jump to US$ 4.5–5.0 Bn starting 2027–2028 under IMF guidelines, following the end of post-2022 grace periods. • Reserve Position: - Gross Official Reserves stand at US$ 6.5–6.8 Bn, but net usable reserves hover around US$ 5.0–5.3 Bn (excluding the restricted US$ 1.4 Bn PBOC swap). - A total reserve buffer of US$ 10.0–12.0 Bn is required for 3–4 months import cover, leaving an active gap of US$ 4.5–5.5 Bn. • Currency & Intervention: CBSL faces tension between buying forex to build reserves and preventing Sri Lankan Rupee volatility. Policy experts urge a rule-based crawling band mechanism rather than hard pegs or free-floats. • Trade & Forex Leakages: Recommends plugging trade mis-invoicing loopholes via integrated CBSL-Customs data tracking (UIN/TIN) and strengthening enforcement under the Foreign Exchange Act. • Tariff Reform: Suggests rationalizing border levies (CESS, PAL) into a simplified two-tier customs structure while shifting revenue collection to domestic VAT to curb smuggling and lower consumer costs.