ARE OUR FOREIGN RESERVES INCREASED TO US$ 3BN IN REAL TERMS? CABRAAL ASKS

• The government had to print Rs. 189 billion to pay its debts on May 15.That is a very serious situation

By Sandun A. Jayasekera

Former Central Bank Governor Nivard Cabraal yesterday countered the claim by his successor Dr. Nandalal Weerasinghe who said that foreign reserves of the country had increased to US$ 3 billion. Mr. Cabraal added it was not so in real terms.  

“Sadly, the euphoria will not long last,” Mr. Cabraal said.   

The CBSL says that its gross official reserves have risen to around US$ 3 billion. Analysts point out that it is because of approximately US$ 500 million of ‘hot money’ inflows by investors who are making phenomenal returns on the back of the appreciation of the rupee and over 25% interest rates for Treasury Bills and Bonds. Analysts also say that the CBSL’s Forex reserves now basically consist of CBSL’s SWAPS of US$ 2,150 million plus IMF loan tranche of US$ 333 million plus ‘hot money’ investments of US$ 500 million, Mr. Cabraal noted.   
“Therefore, no one can claim that our foreign reserves have topped the US$ 3 billion threshold based in facts,” he said.   

The government had to print Rs. 189 billion to pay its debts on May 15.That is a very serious situation. Under Dr. Weerasinghe, the money printing so far has been Rs. 1.061 billion which is more than Rs. 1 trillion in just over one year. There is no end in sight to this trend of repeated injection of money with no value to the economy. This amount had to be printed without even having to pay the foreign debts due to bilateral and private creditors and after increasing tax by 200%, Mr. Cabraal opined.