9 February 2024 12:00 am Views - 361
Gross official reserves held by the Central Bank continued to build up as increased current account inflows in recent times mostly helped it to remain a net buyer of foreign currency from the domestic banking system.
Gross official reserves have risen by US$ 99 million in January, after large inflows of little under US$ 800 million received in December including the second programme tranche from the International Monetary Fund bolstered an otherwise fragile reserve buffer.
With the January inflows, Sri Lanka had US$ 4,491 million which roughly has an import cover of little over 3 months. This was the first time in two years the country was able to rebuild its foreign currency reserves to this benchmark level of import cover.
The continuous ascent in gross official assets after a US$ 2,494 million increase in 2023 will further solidify the economic stability achieved by the country within a relatively short period of time since it ran out of nearly all usable foreign reserves by March 2022, plunging the country into a disastrous economic crisis.
This improvement in foreign currency reserves was also reflective from the 3.2 percent appreciation seen in the rupee in the year through February 02 after a 12.1 percent increase in the value in 2023 against the US dollar.
This became possible as the tourism industry came roaring back last year and continuing to do so, so far this year while the remittance incomes have also normalised.
This in turn made it possible for the Central Bank to purchase foreign currency from the domestic foreign exchange market, and in 2023 it ended up buying US$ 1,895.87 million worth foreign currency, adding into the reserves.
The Central Bank is required to rebuild its reserves under targets from the International Monetary Fund (IMF).
While the reserves contain roughly US$ 1.4 billion worth Yuan denominated swap line of which the usability is limited, the Central Bank said it hasn’t so far attempted its unlocking as there is no such need at the moment as the country currently operates with adequate reserves.