COLOMBO: Sri Lanka’s forex reserves rose to 6.4 billion US dollars by the last week of July up from 5.3 billion US dollars at the end of June 2016, an official said.
Sri Lanka sold a 1.5 billion US dollar sovereign bond and the proceeds are being kept in a fiscal reserve to repay debt. Sri Lanka’s foreign reserves are made up of both monetary reserves in the Central Bank and also the Treasury.
Central Bank’s director of economic research K M Siriwardene said foreign investors have also resumed purchases of rupee bonds.
In the stock market portfolio outflows were continuing.Over July, the cash shortage in interbank markets fell from a peak over 50 billion rupees to 46 billion rupees and the Central Bank’s Treasury bill stock – which is indicative of excess rupee reserves pumped in the banking system to de-stabilize the monetary system remained flat at 270 billion rupees over the month.
Sri Lanka has a managed float or de facto peg, and any sustained rupee reserve injections to the banking system through Treasury bill purchases drives excess credit, imports, dollar defence and foreign reserve losses.