An Echelon Media Company
Monday December 11th, 2023

Sri Lanka targets US$3.5bn forex reserves by end 2021

ECONOMYNEXT – Sri Lanka is expecting to boost the island’s foreign exchange reserves which had fallen to 2.3 billion US dollars by October to 3.5 billion US dollars by the year end, Central Bank Governor Ajith Nivard Cabraal said.

Sri Lanka has lost forex reserves steadily from around August 2019 as inflation policy involving liquidity injections began despite having a pegged exchange rate.

Sri Lanka’s gross foreign currency reserves have plummeted 70 percent to 2.3 billion dollars in the first 10 months of the year and efforts are under-way to boost it with swaps and other borrowings.

“It will include several other swaps as well and it will be at least 3.5 billion US dollars,” he told a post-monetary policy media briefing in Colombo.

The central bank in its six-month policy framework announced on October first had estimated an inflow of 10.85 billion US dollars in the three months through December.

That inflows include 1 billion US dollar bilateral loans, 300 million US dollar multilateral loans, 300 million US dollar syndicated loans, 1 billion US dollars from swaps with other central banks, 4.3 billion US dollars from both merchandise and service exports and 1.8 billion US dollars from worker remittance.

Sri Lanka has 1.5 billion US dollar equivalent Renminbi swap with the People’s Bank of China, which is not drawn down.

“The Chinese one if we take it into our books by drawing the cash then it will be included, but otherwise it won’t. Right now we are taking the reserves without the Chinese loans,” he said.

Governor Cabraal said the RMB is an international reserve currency which can be counted among reserves.

He said Sri Lanka had some RMB assets already.

Sri Lanka’s 81 billion US dollar economy is facing heightened risk of sovereign debt default according to rating agencies which have downgraded the currency to CCC.

Cabraal however said money to repay debt in 2022 has been earmarked and there will be no default.

Foreign reserves of a pegged monetary regime go down as dollars are given in exchange for the newly printed money (convertibility) to prevent the exchange rate from falling.

Sri Lanka has found it more difficult to maintain monetary stability after call money rate targeting with excess liquidity began about five years ago, analysts have said, forcing the central bank and government to borrow abroad to repay loans or run-down existing reserves. (Colombo/Nov25/2021)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka rupee opens at 327.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee opened at 327.00/50 to the US dollar on Monday, from 327.00/30 Friday, dealers said.

On the Colombo Stock Exchange, both indices opened up: The All Share Price Index 0.28 percent at 10,823, and the S&P SL20 0.35 percent at 3,113.85.

Bond yields were up.

A bond maturing on 01.08.2026 was quoted at 14.05/20 percent from 14.05/15 percent.

A bond maturing on 15.01.2027 was quoted at 14.05/20 percent from 14.10/25 percent.

A bond maturing on 01.07.2028 was quoted at 14.20/50 percent from 14.20/35 percent.
(Colombo/Dec11/2023)

Continue Reading

Sri Lanka promoting Buddhist tourism from Vietnam, ASEAN

ECONOMYNEXT – Sri Lanka is planning to boost Buddhist tourism by linking temples in the country with those in East Asia, Foreign Minister Ali Sabry said after to welcoming a delegation of monks from Vietnam.

President Ranil Wickremesinghe, and Minister Sabry have initiated a temple-to-temple program where 100 Sri Lanka temples will be linked with counterparts in the Association of South East Asian Nations region.

“Tourism development will get a lot of growth with the temple-to-temple program,” Minister Ali Sabry said.

Along with the delegation of monks, five travel agents from Vietnam were also invited.

Under the first phase of the Temple-to-temple programs, several monks from Sri Lanka had received invitations from Indonesia, Malaysia, South Korea and Vietnam the Foreign Ministry said.

The Temple-to-Temple diplomacy program will be extended to Singapore, Japan, Thailand and Cambodia during the second phrase of the program.

Sri Lanka is targeting 2.3 million tourists in 2023, after getting about 1.5 million this year. (Colombo/Dec10/2023)

Continue Reading

ADB $200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”
(Colombo/Dec9/2023)

Continue Reading