Inclusion of Ineligible Chinese Swap Raises Concerns Over Transparency in Reserve Reporting
Foreign Reserves Data Misaligned with International Standards
Sri Lanka’s official foreign reserves are overstated by approximately $1.4 billion, according to a new analysis by FactCheck.lk. The discrepancy stems from the inclusion of a currency swap with the People’s Bank of China (PBoC), which does not meet the international criteria for reserve assets as outlined by the International Monetary Fund (IMF).
The controversial RMB 10 billion swap (around $1.4 billion) fails to qualify as a reserve asset under the IMF’s Balance of Payments Manual, 6th edition, which mandates that such assets must be liquid and readily available without conditional restrictions. Since the Chinese swap is subject to limitations on its usability, it falls short of these requirements—despite being counted in Sri Lanka’s official reserves.
Inflated Reserves Paint Misleading Picture
The reported foreign reserves are higher than they should be because they include a swap deal with China’s central bank. In May, the official figure was $6.3 billion, but if adjusted to follow global rules, it would be closer to $4.9 billion. This has caused confusion, as different people use different methods—some count the Chinese swap, others don’t.
FactCheck.lk says this mix-up has allowed misleading political claims about reserve growth since April 2022. Officials have spoken about rising reserves without clearly saying if the Chinese swap was part of the total, giving the wrong picture of Sri Lanka’s real financial situation.
Call for Standardised Reporting of Foreign Reserves
To improve accuracy and trust, FactCheck.lk suggests using the IMF’s method of reporting “usable reserves,” which leaves out items like the Chinese swap that can’t be easily used. They urge Sri Lankan officials to follow global standards so the public gets a clear and honest picture of the country’s economy.
Since foreign reserves affect international trust, investment, and debt deals, reporting them correctly is important for Sri Lanka’s economic recovery.