Sri Lanka in talks with Qatar and Oman for forex swaps
ECONOMYNEXT – Sri Lanka is in talks with Qatar and Oman for foreign exchange swaps, Central Bank Governor Indrajit Coomaraswamy said, while forex reserves had been boosted to 8.0 billion US dollars with a loan from China.
"We are in the midst of talks with the central banks of Oman and Qatar for swap arrangements," Coomarasamy said a forum organized by Asia Securities, a Colombo-base brokerage.
Interventions in the forex markets were about 365 million dollars so far this year in a net basis, which was to prevent a ‘disorderly’ adjustment of the exchange rate he said.
He said it could be argued that going forward, major pressure on the exchange rate may ease.
In the latter part of the year, both remittances and tourism receipts improve, he said.
Coomaraswamy said economic fundamenals were strong though growth was just picking up at a little over 4.0 percent of gross domestic product. However, inflation was low, and budget deficit though slightly higher than expected, was on track and the there is expected to be primary surplus. Fuel was also market priced, he said.
Both Qatar and Oman have monetary authorities which do not generally print money to bring rates down and interest rates or close ‘output gaps’, anlaysts say.
Qatar has a currency board like system with a credible peg where the monetary authority runs consistent policy and had an exchange rate of 4.76 to the US dollar at the time the Central Bank of Ceylon was created in 1950 exactly like Sri Lanka.
At the time Qatar was dollarized with Indian rupees, and Sri Lanka had a currency board, which was also originally based on the Indian rupee.
The Qatar Riyal which was created later in line with the Indian rupee is now 3.64 to the US dollar. The Sri Lanka rupee has fallen to 172 ot the us dollar since the central bank was created in 1950.
Oman also has a currency-board-like system with a highly credible peg.
At the time Sri Lanka’s central bank was created, the ‘exchange rate’ in Oman was about 0.357 to the US dollar.
Now a US dollar is 0.384 to the Omani Riyal.
Oman’s currency is a legacy of bigger coins like the Maria Theressia Thaler, which had a higher denomination than the US dollar unlike the Indian rupee foundation of Sri Lanka and Qatar. (Colombo/Oct23/2018)