Central Bank collects US $ 402mn in Fx in March

• Challenging path likely ahead due to US tariffs  
• So far this year, Central Bank has purchased US $ 484.5mn in foreign exchange in first three months

The Central Bank has continued with its dollar buying binge for the third consecutive year. 

This is after a record amount of foreign currency was purchased in 2024 from the banking system to both rebuild the foreign currency reserve buffer in the country as well to prevent undue volatility. 

According to the data, the Central Bank has purchased as much as US $ 401.9 million and no sales in March, making it the highest monthly foreign currency purchase so far this year and also the highest since last year March.

Last year too, the Central Bank purchased a record high US $ 715.1 million from the domestic market to prop up the reserves.

Last year saw the Central Bank collecting US $ 2,845.7 million in foreign currency, the most for any year and up from US $ 1,895.9 million purchased on a net basis in 2023.

So far this year, the Central Bank has purchased US $ 484.5 million in foreign exchange in the first three months.

The gross official reserves, as of end-February, were at US $ 6,086 million and are set to go up from the March collections of the dollars and also from the receipt of the fourth programme tranche from the International Monetary Fund.

However, with the coming reciprocal tariffs on the US exports and their likely knock-on impact on the overall trade deficit in Sri Lanka, at a time when Sri Lanka is regaining some stability in its external sector, it remains to be seen if the Central Bank would be able to continue on the path of buying foreign currency at the same pace it used to.  

It also remains to be seen if the rupee could be maintained at the current levels, without undue pressure, due to the likely impact from Sri Lanka’s exports, particularly the apparel, which accounts for around 70 percent of total exports to the US.

The Central Bank a fortnight ago said it continued to purchase foreign currency to prevent the rupee from over appreciation.

In the year through April 4, the rupee has depreciated by 1.5 percent against the US dollar.

The stock markets around the world saw continued selling-off for the third consecutive day, when the markets reopened for Monday’s trading, due to the extreme uncertainty caused by the US tariffs last week.

Some analysts opine that the stock market reaction around the world, including Sri Lanka, is overdone.  

US Secretary of State Marco Rubio, taking questions after delivering remarks at Brussels, Belgium, last Friday, reassured that although the markets are crashing, the economies are not.

“No, their economies are not crashing. Their markets are reacting to a dramatic change in the global order in terms of trade,” he said.

“So, I don’t think it’s fair to say economies are crashing.  Markets are crashing because markets are based on the stock value of companies who today are embedded in modes of production that are bad for the United States. We have to be a country that – we’re the largest consumer market in the world and yet the only thing we export is services and we need to stop that. We need to get back to a time when we’re a country that can make things and to do that, we have to reset the global order of trade,” he added in response to the repeated questions about the tariff impact, which has been reverberating through the global market from last Thursday onwards.