Sri Lanka, Sept. 15 -- As an IMF team arrives in Colombo to assess Sri Lanka's economic performance, attention has turned to the country's foreign exchange reserve accumulation. Rebuilding dollar reserves acts as a critical financial shock absorber, but recent performance has lagged behind targets promised under the bailout programme.

The delay raises key questions about whether Sri Lanka can still hit its full-year reserve target, and what trade-offs will be required to achieve it.

Mounting External Shocks Threaten Targets

Professor Rohan Samarajeewa cautions that the reserve shortfall itself is not the primary concern. Instead, the main threat comes from external shocks that derail fiscal and monetary projections.

According to Samar...