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Foreign exchange reserves amounted to US $ 6 billion at the end of 2016

Sri Lanka failed to complete 2016 with official gross reserves above the $ 6,000 million after stocks reached the lowest levels in 5 years in June, according to the latest data from the Central Bank. Gross official reserves improved to US $ 6.06 billion on December 30, here in 2016, against $ 5.64 billion at the end of November, supported by a pair of swap agreements with domestic banks, donations From Japan and a loan from the World Bank grant, the governor of the Central Bank told the media last week. In addition, the intervention of the central bank limited by dollar sales to defend the rupee may also have helped to keep reserves down. Meanwhile, foreign holdings of government securities of Sri Lanka reversed during the first week of the new year, as the value of the rupee bonds of the Treasury and bond securities by foreigners had increased to Rs.260, 581 million On January 4 Rs. 260, 137 million a week ago. However, inventories were still US down $ 1.3 billion since January, when the total number of shares was $ 7,300 million at the beginning of the year (2016). Sri Lanka's gross official reserves fell to $ 5.3 billion in June 2015, the lowest level in five years due to the government's accelerated outlets, increased imports and continued dollar sales for Prevent the rupee from falling. However, following the appointment of Dr. Indrajit Coomaraswamy as governor, the Central Bank limited its intervention on the foreign exchange market and continuously sold its own shares, increasing its foreign exchange reserves. Since January 2016, the Central Bank has been seen injecting cash through excessive print money by buying treasures to keep interest rates artificially low, making loans for banks beyond their deposits. This fueled imports and inflation created, which were then to be processed by selling dollars to prevent the rupee from falling. Dr Coomaraswamy does not see that it is reasonable to defend the rupee squandering of foreign exchange reserves, since in any case leads to monetary depreciation. "It does not seem reasonable to spend large amounts of reserves to defend the currency if you are going to depreciate," he told reporters after unveiling the monetary and financial policies of the central bank in the medium term last week. Sri Lanka spent nearly $ 1.0 billion on reserves in 2016 to defend the rupee, but the currency weakened by 3.8 percent. In 2015, when the country plunged into a balance of payments crisis for the second time since the end of the separatist conflict. Sri Lanka spent $ 2.1 trillion on reserves but broke the currency by 9 percent from Rs.134 to Rs.145 per dollar. During the first BoP crisis in Sri Lanka in 2011-2012 from the end of the conflict, the US Central Bank sold $ 4.100 million on reserves, but rupee depreciated finished 14 percent. Since economic liberalization in 1978, Sri Lanka has been a recurring problem of increased fiscal deficits, higher nominal interest rates, inflation and the overvalued exchange rate, which has made exports from Sri Lanka is less competitive compared to its trading partners.

 
 

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