CB turns net purchaser of dollars in November

CB bought US $ 219.09mn and sold US $ 212.69mn, generating a net inflow of US $ 6.4mn
CB was a net seller of foreign currency in first three quarters of 2022—US $ 273mn in 1Q, US $ 337mn in 2Q and US $ 77mn in 3Q
The Central Bank bought US $ 219.09 million in foreign currency in November and sold US $ 212.69 million in the same month, becoming a net absorber of foreign currency worth of US $ 6.4 million in the month.
This is in comparison to the net foreign currency sales of US $ 8.39 million seen in October. 

The Central Bank for most of 2022 remained a net seller of foreign currency into the domestic foreign currency market, as Sri Lanka ran out of its foreign currency reserves early this year amid inflows running thin while the outflows raced, plunging the economy into its worst crisis. 
According to Charts.lk, a platform that analyses economic and social data, the Central Bank was a net seller of foreign currency in the first three quarters of 2022—US $ 273 million in 1Q, US $ 337 million in 2Q and US $ 77 million in 3Q. 

The lower level of net foreign currency sales was possible in 3Q, due to the tight monetary, fiscal and foreign exchange policies, which helped to slow down the outflows. In addition, Sri Lanka announced a debt standstill in April.
Keeping the policy rates on hold, the Central Bank in November said it observed an improvement in liquidity in the domestic foreign exchange market, enabling it to continue its support for essential imports, to ensure the availability of fuel, power and other supplies necessary for uninterrupted economic activity. 

While the slowing global demand could pose certain challenges in the period ahead, the Monetary Board noted that the prospects for tourism and worker remittances could to a larger extent offset the negative spillovers. 
While the October merchandise exports data showed early signs of slowing demand for Sri Lankan-made apparels in the key markets, as such earnings came down by a little over 13 percent, the earnings from tourism and remittances have been higher. 

The remittances, continuing its months-long ascent, reached a 16-month high in November while the tourism earnings in the same month surpassed US $ 100 million for the first time since April.

Meanwhile, the Central Bank last week said the data for September and October had shown that the exporters had repatriated all their proceeds and had converted 25 percent of such proceeds into rupees, in line with the minimum conversion requirement. 

The much-expected rescue package from the International Monetary Fund, which is contingent on the broader debt assurances from the country’s external creditors, would offer the Central Bank further impetus to collect foreign currency in its efforts to rebuild the country’s external reserves.