The dollar inflows to Sri Lanka have increased substantially in the recent weeks, and a significant part of them were absorbed by the Central Bank boosting foreign reserves of the country, the Central Bank said in a statement.
 

According to the Central Bank these dollars came from several sources.

 

"Firstly, there were significant inflows to the Colombo Stock Exchange (CSE), with the net inflows to the CSE so far in 2012 amounting to US 164 mn.  Secondly, there were inflows in respect  of investments in several commercial banks, amounting to about US $127 mn during this week."  

 

"Thirdly, investments in Sri Lanka Development Bonds (SLDBs) were made to the value of US $87 mn, comfortably exceeding the US $45 mn,  that was maturing and was on offer for re-investment.  Finally, net investments of US $385 mn in Treasury Bills and bonds were made by foreign investors so far in 2012," the Central Bank said.

 

It also noted that further dollar inflows are expected in the next few weeks which would include inflows as a result of several commercial banks raising funds abroad for their Tier 2 capital, and an initial investment of approximately US $ 73 million in a mega hotel project.

 

The Central Bank also affirmed that in response to the recent policy measures implemented by the bank and the government that there are clear signs of a deceleration in private sector credit growth and import demand.  

 

A further moderation is expected once the New Year seasonal demand for imports is over, thereby substantially easing the deficit in the trade account, the Central Bank said.

 

"The increasing foreign currency inflows, and the easing of the import demand as stated above are expected to stabilize the foreign exchange markets in the coming weeks," the Central Bank noted.