Foreign reserves and current account balance have also declined - the economy is heading back into crisis

Sri Lanka’s economy is slowly but surely heading towards a crisis once again, Matale District Parliamentarian Rohini Kaviratne said in a statement. Sri Lanka’s current account surplus, which was $432 million in the second quarter of 2024, has declined by $129 million to $303 million in the third quarter.

The previous government was able to maintain a surplus in the current account after the country’s economic bankruptcy, but within the first three months of the current government, that amount has declined by $129 million. The primary account balance is due to the receipt of funds from investments, foreign borrowing for domestic spending, etc. Weak governance and failure to closely manage the economy are the main reasons for the decline in the current account balance.

Official foreign reserves down

The country’s official foreign reserves have also declined in the past two months. In the first month (October 2024) of Anura Kumara Dissanayake’s presidency, the official foreign reserves were $6,472 million. It was $6,451 million in November, down by $21 million. As of December 31, 2024, it had fallen to $6,091 million, or $360 million. The decline in official reserves in three months was $381 million.

The previous government paid all debts and interest owed to multilateral creditors such as the International Monetary Fund, the World Bank, and the Asian Development Bank, but it was able to continuously increase foreign reserves and maintain a ‘positive’ current account balance. This situation has been reversed in the first 100 days of the current government.

The government has already taken steps to impose a tax burden on all sections of society that save money. There are 65 million bank accounts in the country, including children's, women's, youth and elderly bank accounts, with deposits/fixed deposits of Rs. 17 trillion. The government has taken steps to double the interest income received through all these accounts by increasing the withholding tax from 5% to 10% to cover all these accounts.

The government is putting pressure on the people to increase its tax revenue, but has failed to manage the economy. The pressure will be felt very strongly by every sector of society by next April.