July 26, 2007 (LBO) – Sri Lanka’s balance of payments is under control despite the steady loss of foreign reserves in the past few weeks and the rupee coming under pressure, Central Bank officials said. The country has been losing foreign reserves since April when international reserves peaked in the wake of tight monetary policy and sales of rupee bonds to foreign buyers.
Since late June the reserve outflow has accelerated with domestic assets in the country’s reserve money indicated by central bank’s holdings of treasury bills rising sharply and foreign assets falling.
But officials say the balance of payments as well as reserve money is under control.
“There are different types of sources [of reserve money],” says Deputy Governor W A Wijewardene.
“One is the acquisition of net foreign assets by the Central Bank. The other one is the acquisition of the net domestic assets of the Central Bank. From time to time, depending on the outcome of the balance of payments, this can shift from one sector to the other sector.
“If the total reserve money is maintained at the target level whether the distribution is between the domestic sector or the external s