Sri Lanka’s foreign reserves fell by a whopping US $ 884.92 million during the month of November to little over US $ 7.01 billion, partly due to a US $ 500 million payment under the Asian Clearing Unit, the latest data released by the Central Bank showed.
The Central Bank on November 14 unexpectedly raised its main interest rates to defend the rupee, which has faltered as foreign capital outflows pick up due to the domestic crisis as well as rising U.S. interest rates.
The Central Bank in October sold US $ 303.55 million to defend the rupee while it purchased US $ 7 million.
In September, the Central Bank sold US $ 297.5 million and bought US $ 3 million.
The rupee however fell 1.8 percent in November and has slid 16.5 percent so far this year.
This year, there have been Rs.19 billion of outflows from stocks and Rs.143.4 billion from government securities, the latest data from the Colombo Stock Exchange and the Central Bank data showed.
The Central Bank hopes to complete this year with foreign reserves of US $ 7.8 billion, US $ 200 million below the rate that they would think as having a comfortable reserve position.
Meanwhile, all three international rating agencies have downgraded Sri Lanka’s sovereign rating, following the political crisis that was triggered on October 26 with the sacking of the then prime minister Ranil Wickremesinghe by President Maithripala Sirisena.
The rating agencies cited exacerbation of refinancing risks as the key reason for the rating action.
Meanwhile, the rupee ended slightly weaker yesterday, as foreign investors continued to exit from bonds and stocks as a lingering political crisis weighed on the market sentiment ahead of a key ruling by the island nation’s Supreme Court.
According to Reuters, foreigners sold a net Rs.230.9 million worth of stocks yesterday and they have been net sellers of Rs.9.8 billion since the political crisis began on October 26.
The bond market saw outflows of about Rs.51.2 billion between October 25 and December 5, the Central Bank data showed.
Foreign investors sold a net Rs.17 billion worth of government securities in the week ended on November 5, the highest weekly net outflows since the third week of February 2017. The stock market had net foreign outflows to the tune of Rs.929.1 million last week.
The rupee ended at 179.00/20 per dollar yesterday, compared with 178.70/85 in the previous session.