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Sri Lanka central bank pours oil on troubled forex markets

Officials from K. Seeds Investments Pvt Ltd (at left) with officials from Commercial Credit and Finance PLC (at right)

August 14, 2007 (LBO) – Sri Lanka's central bank sought to calm the country's forex markets in its August monetary policy statement as the rupee came under increasing pressure and inflation spiked up. The rupee hit a life low Monday moving down to 112.00 to the dollar, despite intervention from official quarters.

The central bank said exports grew by 12.9 percent in the first half of 2007 with a surge in June exports to 675 million dollars, while imports decline by 11.5 percent in the month slowing first half import growth to 3.9 percent.

External Ok

"The negative growth in imports against a background of rising exports caused to improve the trade balance further by end-June 2007," the Central Bank said.

"Worker remittances, the second highest foreign exchange earner to the country, increased by around 18 percent to 1.3 billion US dollars during the first half of 2007 helping to finance over 80 per cent of the trade deficit in the first half of 2007."

The bank said the balance of payments was in surplus by 160 million dollars by end-July 2007. This was lower than the 250 million reported in May.

Official reserves were 3.1 months of imports or 2.7 billion dollars.

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