ECONOMYNEXT – Sri Lanka’s foreign reserves recovered to 7,519 million US dollars in June 2015 from 6,845 million US dollars in May, helped by bond sales by the state, official data showed.
In June Sri Lanka received the proceeds of a 650 million dollar sovereign bond and 665 million dollars of dollar bonds sold in the domestic market but June is also a month where there are heavy debt repayments.
Dollars however will move out of the country regardless of whether there are foreign repayments even when proceeds are spent by the state in the domestic markets, which then generate imports.
While foreign borrowings however can reduce pressure on domestic credit markets.
Sri Lanka’s foreign reserves have been under pressure due to rising consumption fired by state spending and historically low interest rates which are discouraging savings and encouraging credit.