Significant increase in Gross Official Reserves in 4 Months
The Gross Official Reserves of Sri Lanka has been estimated to reach USD 2,180 million as at 31.07.2009 showing an increase of 71% from the foreign reserve levels of USD 1,272 million as reported on 31.03.2009. The increase in the reserves to the current level had been mainly due to the receipt of the first tranche of the IMF Standby Facility and the significant absorption of foreign exchange from the domestic market during the past 4 month period. On this basis, the current level of estimated reserve is well-above the level expected by end September 2009 under the Standby arrangement with the IMF.
The Central Bank also expects foreign reserves to increase further in the coming months with continued receipts of foreign exchange from foreign investors and the Sri Lanka Diaspora, particularly due to the enhanced confidence based on the improved political stability, and the
widening investment opportunities in the country.
Inflation remains low in July 2009
The rate of inflation, as measured by the point-to-point change in the Colombo Consumers’ Price Index (CCPI) (2002=100), computed by the Department of Census and Statistics, recorded 1.1 per cent in July, 2009 after reaching five year low of 0.9 per cent in June, 2009. The annual average inflation rate declined further to 10.4 per cent, compared to 12.5 per cent in June 2009, continuing its decelerating path recorded since November, 2008.
The CCPI increased marginally by 0.4 per cent over the previous month, with the Index moving upward to 208.7 from 207.8 in June, 2009. The positive contributions to the monthly increase in the Index arose from the sub categories of Health, Transport, and Housing, water, electricity, gas and other fuels. More specifically, increases were recorded in the payments to private hospitals and consultation fees to specialists. The fuel and gas prices were also increased since the first week of July. However, the full impact of these increases on the index was partly off-set by price decreases in Food and Non alcoholic beverages.
The Core inflation, on a point-to-point basis, declined to 6.0 per cent in July, compared to 7.7 per cent in June, 2009. The monthly core inflation reached 1.1 per cent, and the annual average core inflation declined further to 14.2 per cent in July, 2009 from 15.2 per cent in the previous month.
Sri Lanka to close central bank swap with China: CB Governor
Aug 06, 2009 (LBO) – Sri Lanka’s central bank is expecting to close a “token” swap contract with China though the monetary authority is no longer in urgent need of dollars after an International Monetary Fund loan came through, Governor Nivard Cabraal said.
“We are going ahead with a token 25 million US dollar swap with China to build up relations,” Cabraal said.
“After the IMF loan we are very comfortable.”
The Central Bank also has a 200 million US dollar swap with Malaysia. Cabraal said the monetary authority would keep the contract going since it was on “attractive terms”.
Cabraal said following the IMF loan and inflows to the government treasuries market, plans to negotiate other alternative financing will be dropped.
“The IMF was plan A, and after it came we do not need to pursue alternatives,” he said.
The central bank has previously said it was chasing swaps with two countries. Market analysts believe the second country was India.
Sri Lanka’s gross reserves rose to 2.1 billion US dollars by the end of July 31, the central bank said Tuesday with a 322 million US dollar (206.7 special drawing rights) first tranche of a 2.6 billion dollar loan also coming into the country the previous week.
Under the 20-month program Sri Lanka’s government and the central bank can borrow 1,750 million US dollars, including swaps.
The central bank said it had exceeded the foreign reserve target for September set under the IMF program for September 2009, indicating that the Sri Lanka rupee would not move from its current position in the short term.
The reported gross official reserves do not correspond to the IMF’s definition of net international reserves (NIR) which excludes borrowings, including swaps and non-convertible currencies represented by a regional clearing arrangement.
It also excludes advances to local banks, which the central bank has been counting among gross reserves. The IMF program assumes that the 283 million dollar loan would be fully repaid to the central bank by the end of this year.