Foreign reserves improve to US $ 5.7bn in Dec.

Sri Lanka’s foreign reserve buffers have improved by US $ 200 million during December to end the year with a total reserve position of US $ 5.7 billion, a safe level compared to all the headwinds during 2020. 

The current reserves position has the potential to cover 4.3 months of imports, also providing a sufficient cover in respect of reserve adequacy, albeit it is well below the US $ 7.6 billion by end-2019. Sri Lanka repaid US $ 4.5 billion worth of foreign currency loans during 2020, including a billion dollar sovereign bond and it lost crucial inflows from tourism, other services inflows and portfolio flows, as the pandemic crippled the global economies, including the stable ones. 

The Central Bank purchased US $ 282.5 million during 2020 from the domestic market to build up the reserves. 
The Central Bank further said it expects to continue on this path and would remain a net purchaser of dollars through 2021 as well.  

During the last couple of months, the net dollar purchases by the Central Bank declined, before turning to forex sales of US $ 22.5 million in December. 

Sri Lanka is eying capital inflows, including a US $ 1.5 billion swap facility from the People’s Bank of China, US $ 700 million from China Development Bank, US $ 300 million from Reserve Bank of India and several other bilateral and multilateral funding lines during 2021. 

The Central Bank this week hinted that it remains keen to launch another sovereign bond this year and is awaiting the opportune time.