Sri Lanka to keep asset sale dollars for liability management

ECONOMYNEXT – Sri Lanka will set up a separate foreign exchange account to receive the proceeds of asset sales which will be used for debt repayment, Central Bank Governor Indrajit Coomaraswamy said.

The proceeds from the sale of shares of Hambantota port, state hotels and any real estate sales to foreigners will go to this account, Governor Coomaraswamy told a forum organized by Fitch, a rating agency.

Any foreign exchange inflows kept as dollars will be ‘monetary policy neutral’ and will also not affect the rupee dollar exchange rate.

The domestic currency will come under pressure if the central bank buys dollars, and then does not sterilize (mop up) the rupees it mints to buy the foreign exchange (expanding reserve money) and if it does not again spend the acquired dollars to defend the currency when the rupee come to the market as imports.

Governor Coomaraswamy said the money in the special account will be used for liability management.

Sri Lanka has a spike in maturing foreign liabilities around 2020 and onwards.

Sri Lanka was also looking at the possibility of raising extra debt in 2017 to repay some maturing bonds earlier. (Colombo/June11/2017)

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