Sri Lanka forex reserves slip to US$4.8bn in January 2021

ECONOMYNEXT – Sri Lanka’s gross official reserves were at 4.8 billion US dollars in by end January 2021 Central Bank Governor W D Lakshman said and efforts were underway to boost them.

Sri Lanka reported 5,665.1 million dollars of foreign reserves by end December 2020.

Sri Lanka is targeting year end gross official reserves of 5.5 billion US dollars.

The central bank had bought about 10 million dollars in recent days after a requirement of banks to sell 10 percent remittances converted by recipients.

Banks have to sell converted dollars to the central bank under a formula depending on availability and settle the balance every quarter.

Last year Sri Lanka received about 7.1 billion US dollars in remittances and this year the central bank is expecting 7.5 billion US dollars in 2021.

Sri Lanka is giving priority to settling debt, and had already paid ‘large chunks’ Governor Lakshman said.

This year also Sri Lanka would maintain an unblemished record in repaying debt, he said.

Sri Lanka was in talks with several central banks, multilateral agencies and banks to get finances and swaps, he said.

However the International Monetary Fund is not included among them as the current ‘alternative’ policy approach was unlikely to succeed under the agency, Governor Lakshman said.

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Sri Lanka economy managed in ‘alternative’ way, critics on wrong track: CB Governor

In February 2021 India did not roll over a 400 million dollar swap it had given in 2020.

This week however the central bank failed to sell the bulk of a 40 billion rupee bill auction, under self-imposed price controls.

Excess liquidity jumped to 154 billion rupees on Friday, the settlement day from the bill auction, up from 134 billion rupees a week earlier, paving the way for more pressure on the rupee or forex losses when the exchange rate is defended against the liquidity which will end up in forex markets through imports. (Colombo/Feb12/2021)

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