ECONOMYNEXT – Sri Lanka has shifted some of the Treasury foreign reserves which were earlier held in the United States into Switzerland in 2024 to manage risk, the central bank said.
Sri Lanka’s central bank has its own monetary foreign reserves and also manages Treasury (fiscal) foreign reserves coming mainly from foreign loans.
The accounts are operated under the name of Deputy Treasury Secretary (DST).
“The part of DST’s US dollar funds held in US territory was transferred to Bank for International Settlements (BIS), Switzerland for the purpose of risk management in the year of 2024,” the central bank said.
The balance of the DST’s dollar account 2 was accounted separately and it was 106.11 million dollars by end 2024, the central bank said.
Proceeds of the current International Monetary Fund this time is going to the Treasury, which can be used to repay debt. In past programs, IMF loans were given to the central bank to replenish reserves lost after the central bank’s inflationary rate cuts or refinancing operations.
Traditional Switzerland has had one of the best central banks operating consistent monetary policy which made the country’s exchange rate strong, banks safe and government debt to GDP ratio low as currency board regimes in Europe of around 40 percent of GDP.
Following the Fed’s housing bubble crisis, the Swiss National Bank bought dollars and injected money to the banking system by building foreign reserves rather than buying government securities (printing money) unlike other central banks which are now having political instability and debt problems.
After initially keeping interest rates negative, SNB started remunerating excess reserves from dollar purchases to maintain positive interbank rates.
In 2022 when Germany’s inflation hit 7.9 percent triggering strikes and growing popularity of Afd, Switzerland only had 2.8 percent inflation.
Nationalists and Neo-Nazis have failed to gain popularity in Switzerland unlike in the countries with greater monetary instability and abundant reserve regimes with domestic assets where aggressive central bank policies have discredited traditional liberal parties. (Colombo/May02/2025)