ECONOMYNEXT – Sri Lanka’s central bank said has received 7 responses to a request for proposals for a medium term financing by securitizing remittances surrendered to it by commercial banks.
“Accordingly, there were seven (7) responses, among which there were five (5) leading international banks and two (2) established investment arrangers,” the central banks said.
“These responses are being reviewed to determine the most suited modality to initiate the securitised financing arrangement,”
Proposals were requested on November 12, “for the arrangement of a medium-term foreign currency financing facility by securitising the foreign currency receipts of the Central Bank of Sri Lanka,” on behalf of the government.
The central bank had earlier asked banks to surrender 10 percent of worker remittances received by them.
Currently a non-credible soft-peg currently set at around 200 to the US dollar, which severely on its ‘weak side’ amid liquidity injections made to enforce a 6.0 percent policy rate.
Analysts have warned that any forex surrenders to a pegged monetary authority – which create yet more liquidity – will further undermine the credibility of the peg, at a time when ‘strong side’ interventions are being to stop it from falling.
In October the central bank bought 41.25 million US dollars from banks and sold 113.27 million dollars to enforce a weak-side convertibility undertaking.
The central bank also provides dollars for government debt repayments in a de facto weak-side convertibility undertaking which is not captured in the data.
The central bank has steadily lost reserves following liquidity injections, and has engaged in several quasi-fiscal activities. Its net foreign assets are now negative. (Colombo/Dec04/2021)