Sri Lanka foreign reserves US5.2bn in November

(From left) Dharmasri Kumaratunga, Director - Payments and Settlements, Central Bank; Nanda Fernando, Managing Director, Sampath Bank; and Tharaka Ranwala, Head of Operations and Group Chief Marketing Officer, Sampath Bank

Jan 20, 2010 (LBO) – Sri Lanka’s foreign reserves reached 5,228 million US dollars by end November 2009, which was equal to 6.4 months of imports, the Central Bank said. In 2009 the trade deficit was 2,468.5 million US dollars and remittances were 567 million US dollars higher. With the balances of the Asian Clearing Union, a regional settlement arrangement involving countries which do not have fully convertible currencies, reserves were at 5,308 million US dollars.

The Central Bank said foreign investors had pumped in 262 million US dollars to government Treasury bills and 1,068 million US dollars to Treasury bonds.

Foreign remittances from expatriate workers were up 14.7 percent to 3,035 million US dollars in the eleben months to November.

Sri Lanka has a pegged exchange rate regime.

As a result foreign remittances and borrowings, which increase the spending power of the people are the key drivers of Sri Lanka’s trade deficit, unless the Central Bank sterilizes the resulting rupee liquidity to lock up reserves.