Sri Lanka may use extra forex reserves in Exim bank: CB Governor

Dec 02, 2010 (LBO) – Sri Lanka may use extra foreign reserves in a proposed export import bank to be set up next year to finance exporters and contractors, Central Bank Governor Nivard Cabraal said. China transferred a part of its foreign reserves to a forex management agency after issuing Treasury bills to its central bank. The forex management agency has put some of the money in China’s Exim bank.

Sri Lanka’s proposed exim bank which will mainly finance exporters and also contractors who may win deals from foreign governments, is to be set up next year, Cabraal said. Governor Cabraal said earlier this year that an export import bank (Exim Bank) will be set to promote trade.

“We may use some of the reserves in the Exim Bank,” Cabraal said.

The central bank is now sitting on 6.7 billion US dollars of foreign reserves which the central bank says is more than the targeted level.

A pegged central bank which collects foreign reserves larger than its domestic money supply has to spend large amounts of money as interest to sterilize the excess liquidity.

Now the rupee value of foreign reserves is twice the domestic monetary base of about 350 billion rupees.

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