Sri Lanka gets first US$292mn from China for Hambantota Port

ECONOMYNEXT – Sri Lanka has received 292.1 million US dollars from China Merchant Port Holdings Company Ltd, as the first instalment for buying an equity stake in Hambantota port.

Sri Lanka’s central bank said the money had been credited to a Government of Sri Lanka account maintained at the central bank.

The funds will boost Sri Lanka’s forex reserves as fiscal reserves are also counted as official reserves.

Sri Lanka periodically runs out of monetary forex reserves in cyclical balance of payments crises. The monetary authority prints money to prevent interest rates from going up when credit demand goes up, and intervenes in forex markets and prints more money (sterilized forex sales).

The latest mass-money printing/BOP crisis episode occurred in 2015-2016.

The central bank has been sterilizing forex purchases steadily and collecting reserves during most of 2017.  (Colombo/Dec16/2017)

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