Dec 05, 2012 (LBO) – Sri Lanka is expecting a ‘balance of payments’ surplus of 380 million US dollars in 2012 the latest Central Bank projection said, down from a 1.25 billion US dollar projection in May. For 2013 the Central Bank is projecting a BOP surplus of 780 million US dollars, according to a presentation made by Central Bank Governor Nivard Cabraal to executives of Sri Lanka’s finance companies Monday.
A so-called BOP surplus roughly corresponds to an increase in Central Bank’s foreign reserves adjusted for items such as valuation changes.
Foreign reserves can increase steeply if there are reserves are captured and locked by a sell down of Central Bank’s Treasury bill stock preventing the converted rupee proceeds from being spent, either directly by the recipients or others through credit.
Foreign reserves fall rapidly in the Central Bank prints money by purchasing large volumes of Treasury bills either to finance a deficit budget or to continuously sterilize foreign exchange sales.
During the last balance of payments crisis, the Central Bank held Treasury bill stock rose from almost zero to around 240 billion rupees.
In the absence of a sell down of T-bills reserves will