Gross foreign reserves down to US$ 4.6bn end-February

• CB purchases US$ 28mn from worker remittances and US$  8mn from exports in Feb.
• Expects US$ 1.2bn inflow to foreign reserves this year under mandatory export proceeds conversion rule
• Stops defending rupee, though Rs.185 against the US dollar is believed to be the desired level

Sri Lanka’s gross official foreign reserves were maintained at US$ 4.6 billion at the end of February despite the settlement of US$ 400 million currency swap facility with the Reserve Bank of India (RBI) in the same month, according to provisional estimates of the Central Bank (CB).

At the end of January, Sri Lanka’s foreign reserves came down to US$ 4.8 billion from US$ 5.6 billion at the end of 2020. 

In February, the CB purchased US$ 28 million from worker remittance conversions and US$ 8 million from export proceeds conversions under its strategy to build up reserves with non-debt creating foreign exchange inflows.

CB Deputy Governor G.R.D.N. Nanayakkara said the CB expects US$ 1.2 billion inflows to foreign reserves this year, under the mandatory export proceeds conversion rule, where the CB plans to purchase 12.5 percent of export inflows.

Further, the CB stopped interfering in the exchange market defending the rupee from February, although, it believes that Rs.185 to be the desired exchange value of the rupee against the US dollar. 

According to CB, US$ 3.5 billion external debt repayments are scheduled for the remainder of the year. 

However, including domestically issued foreign currency debt, the total foreign currency debt is estimated in the range of US$ 6.5-6.8 billion for the year.

Sri Lanka has US$ 1 billion international sovereign bond (ISB) maturing in late July this year. However, the CB noted that US$ 300 million of the ISB is held by Sri Lankans. 

In addition to non-debt creating inflows, the CB expects to enter into a US$ 1.5 billion currency swap facility with Bank of China shortly. (NF)