ECONOMYNEXT – Sri Lanka’s forex reserves remained at 1.9 billion US dollars in April 2022, Finance Minister Ali Sabry told parliament, broadly around the same level as in March.
On May 04, Sabry said usable reserves are less than 50 million US dollars.
Foreign currency reserves were 1.673 billion dollars, down from 1.702 in March, Sabry said.
Most of the foreign currency reserves are 10 billion Chinese Yuan which cannot be freely used.
“The amount received under this agreement can be used to finance trade and direct investment between the two countries and for other purposes agreed upon by both parties,” the central bank has said
IMF reserves 65.5 million dollars down unchanged.
SDR 117 million mostly unchanged.
Gold was 29.8 million mostly unchanged.
Other reserves 21 million up from 1 million in March.
Sri Lanka started to float the currency in March, after running out of reserves.
A country with a free floating exchange rate can import, export, pay debt without using any reserves as long as interventions are not done either to buy or sell foreign exchange by isolating reserve money from the balance of payments by suspending convertibility. (susno reserve pass through).
However Sri Lanka has imposed a surrender requirement which analysts says had delayed a float from taking hold.
Meanwhile India has also give 400 million US dollar swap and delayed payments under the Asian Clearing Union to give money to the central bank to use for imports.
Though well intentioned, it can also end up undermining a float, analysts say. The IMF in contrast does not allow any reserves it injects to be used for imports. Most first world central banks, which have clean floating regimes, unlike third world ones, do not give one cents for imports. (Colombo/May05/2022)