Dec 06, 2011 (LBO) – Sri Lanka has raised a limit on the foreign holdings on Treasury bills to 12.5 percent of outstanding government debt from 10 percent, the Central Bank said, amid rising interest pressure from the defence of a dollar peg. The raising on the foreign Treasuries holdings limit will increase “resource availability, while also easing the domestic savings-investment gap and thereby mitigating any pressure on interest rates,” the Central Bank said.
The central bank said a reduction in excess liquidity in the banking system had caused rates to rise in recent weeks, though inflation was lower.
“Meanwhile, foreign investors have expressed continued interest in investing in the Government Securities market, as a result of growing uncertainties in advanced economies and greater prospects in emerging economies,” the Central Bank said.
Standard and Poors placed 15 Euro nations on credit watch last night including triple A rated Germany, The Netherlands, Luxembourg and Austria.
Foreign investors held as much as 68 billion rupees worth Treasury bills and 200 billion rupees worth of Sri Lanka bonds.
There has been about a 4 billion rupees exit from bills and small sales in the foreign bond holdings over the past week.
The Central Bank said economic growth remained “healthy” and credit by commercial bank was “robust.”