Sri Lanka foreign reserves inch up in April

Sri Dharanee Performance Arts Theatre

June 22, 2009 (LBO) – Sri Lanka’s official external reserves without advances to domestic banks had increased 59 million US dollars to 1,131 million US dollars in April from 1,072 million US dollars in March, the Central Bank said.

Remittances were 228 million US dollars more than the trade deficit, the Central Bank said

As Sri Lanka maintains a de facto peg with the US dollar, remittances, net capital inflows and the net sterilization activities of the central bank are key drivers of the trade deficit.

From May to June 19, the central bank had bought 367 million US dollars from forex markets. Last week, 66 million US dollars in fresh funds were raised from a government bond sale.

The treasuries market has seen a 190 million US dollar inflow since the float of the currency, and the government was also able to settle a 125 million US dollar commercial loan this month.

Sri Lanka is expecting a 1.9 million US dollar standby loan from the International Monetary Fund, which has been delayed due to foot-dragging mainly by the United States.

With an advance to two domestic banks of 165 million US dollars, the reserve balance was 1,296 million US dollars in April, up 24 million US dollars.

Last month’s total reserves – with a domestic asset of 200 million US dollars – were 1,272 million US dollars.

Official reserves are a gross number which includes fiscal balances and borrowings.

The central bank said reserves with Asian Clearing Union (ACU) balances had increased to 1,471 million US dollars.

The central bank’s net foreign assets which backs the local money issue, moved up to 896 million US dollars in April, based on an end-month exchange rate of 120.07 rupees, from 830 million dollars in March.

Sri Lanka’s reserves have been moving up since the monetary authority ended an expansionary sterilized intervention cycle in March 2009, a float.

The central bank said remittances were flat at 260.2 million in April. In the first four months remittances were down 1.6 percent to 1,033.9 million US dollars.