CB manages to purchase US$ 34mn in June despite foreign liquidity crunch

The Central Bank was able to maintain net absorptions of foreign exchange amid the most difficult circumstances created in the domestic foreign exchange market with slowdown in inflows, and heightened outflows with regard to imports and other foreign commitments. 

According to fresh data coming from the Central Bank, the monetary authority has managed to purchase US$ 33.71 million in June, increasing from US$ 3.57 million in May keeping its record of continuous additions into the foreign exchange reserves starting from February this year. 

There were no sales of foreign exchange during June as the Central Bank took myriad measures to ward off the pressure building up on foreign exchange liquidity by way of reinstating the mandatory export receipts conversation rule into its original from May 28, implementing even tighter controls on foreign exchange outflows and working with banks on matching the outflows with inflows of foreign exchange to restrain the demand for foreign exchange.

With June net absorptions, the Central Bank has so far bought US$ 140 million worth foreign currency to replenished foreign currency reserves, which get depleted due to foreign debt commitments. 

Meanwhile, there are signs of export earnings picking up from the recent depths it fell due to virus related restrictions. 

The preliminary data showed that earnings from merchandise exports had closed in on US$ 1.0 billion in June 2021, up from US$ 884 million in May and US$ 818 million in April.  Earnings from exports have thus far averaged US$ 950 million a month and the momentum is expected to continue with the easing of local restrictions and the stronger rebound seen in the United States and European economies.

Meanwhile, despite the still strong remittance income, the Central Bank softened its target of remittances to US$ 7.5 billion from earlier US$ 8.0 billion, about the same level seen in 2020.  The expenditure on imports are also expected to ease a bit with the restrictions in place and the rationing of releasing foreign exchange by banks on transactions including for opening letters of credit to fend off unwarranted pressure stemming on the exchange rate.