CB continues to purchase foreign currency from banking sector, rebuilding reserves

The Central Bank has continued its foreign currency buying spree for the fourth consecutive year running, as they ended up being the net absorber of foreign currency in February 2025, extending from January.

The data showed that the Central Bank had collected US$ 78.3 million in foreign currency from the domestic foreign exchange market in February but ended up with net purchases of US$ 70.3 million for the month due to little sales of about US$ 8.0 million which appears to have been made to support the currency.

For the two months through February 2025, the Central Bank had purchased US$ 82.6 million on a net basis, with January’s Rs.12.3 million net absorption.  

The Central Bank has said they intend to purchase at least US$ 2.65 billion on a net basis from November 2024 through the end of December 2025 in a bid to further bolster its foreign currency reserves.

In 2024, the Central Bank ended up purchasing net US$ 2.85 billion in foreign currency, the highest in the history and higher than the US$ 1.89 billion they purchased back in 2023 when the country was returning to a semblance of normalcy after an upheaval for nearly two years which lasted for most of 2023.

By the end of February 2025, Sri Lanka’s gross official reserves stood at US$ 6,095 million, little changed from a month ago. The Central Bank will have to continue to collect foreign currency from the banking sector to bring the gross official reserves to a level stipulated by the International Monetary Fund by the end of 2025.

According to the IMF, Sri Lanka will have to raise its gross official reserves to about US$ 7.1 billion by the end of 2025 which is equivalent to 3.2 months of import cover.

While the number of months of imports cover is an often used gauge of measuring a country’s reserves heft, other measures are available too such as fall in liabilities in the next 12 months in comparison to the reserves.
According to the Central Bank Governor, Dr. Nandalal Weerasinghe, Sri Lanka’s reserves are placed comfortably based on that measure too.