Sri Lanka foreign reserves surge to US$5.7bn: Central Bank

Sept 02, 2010 (LBO) – Sri Lanka’s foreign reserve surged to 5,731 billion US dollars in June 2010 when counting domestically arranged currency swaps, the Central Bank said. In May 2010 the monetary authority reported foreign reserves of 5,032 million dollars.

No mention of swaps was made with the release of May data.
The central bank uses forex swaps to sterilized excess rupee liquidity.

In 2010 excess rupee liquidity has been generated from central bank purchases treasury bills to monetized debt and also profit transfers.

With the balance of the Asian Currency Union, an arrangement with countries whose currencies are not convertible, foreign reserves were 6.0 billion US dollars in June.

Sri Lanka has foreign reserves far in excess of its monetary base of about 320 billion rupees (2.8 billion US dollars) in June. But because the central bank runs an unstable or ‘soft’ peg arrangement it can lose all the reserves suddenly.

The reserves were equal to about 5.7 months of average imports during the past 12 months.

During the first half of 2010, remittances from expatriate workers had increased 13.5 percent to 1,820 million US dollars from a year e