Forex reserves to exceed US$ 3 Bn soon

Measures being taken at present will ensure that by end of 2021 official foreign exchange reserves will remain above US$ 3 billion, the Central Bank of Sri Lanka (CBSL) said yesterday.

In a news release issued last night, the CBSL said that despite the headwinds of the economic impact of COVID-19 and challenges posed by various adverse developments in the external sector, the Sri Lankan economy showed resilience throughout 2021.

“Sri Lanka successfully met its debt obligations by repaying foreign loans, including the payments of the International Sovereign Bonds (ISBs). Since the beginning of the year both the CBSL and the Government have been actively pursuing possible avenues to replenish official reserves, with an emphasis on encouraging non-debt flows, so that the existing foreign debt could be managed in a sustainable manner,” the CBSL noted.

These efforts were accelerated since October 2021 with the announcement of the Six-Month Road Map for Ensuring Macroeconomic and Financial System Stability, which set out definite envisaged targets for building up of official reserves in the near term.

The CBSL said: “As articulated in the Six-Month Road Map, a number of foreign exchange inflows are envisaged in the very near term. Major foreign exchange inflows to the Central Bank include the SWAP facilities with Middle Eastern and other regional Central Banks amounting to about US$ 2.0 billion. The Government is also in the process of securing Government to Government financing, syndicated loans as well as loans from multilateral organisations. In addition, the expected foreign exchange facilities that were negotiated during the high-level visits abroad made by authorities are also progressing well. Further, the interventions made by the CBSL on several facets of the foreign exchange market, such as the incentive scheme introduced for workers’ remittances, and the repatriation and conversion requirements on account of exports proceeds will improve the liquidity in the domestic market, thereby enabling the Central Bank to build up official reserves further.

With the recent rise in departures for foreign employment and the exponential growth observed in tourist arrivals over the last few months, the external sector is expected to recover well in the period ahead and the pressures observed at present are expected to moderate with increased foreign exchange inflows to the economy. The Government and the CBSL remain confident that these expected inflows will materialise and the reserve position will remain at a comfortable level throughout the year 2022.”