Sri Lanka official reserves at USD7.6bn by Sept; YTD rupee appreciation 1.3-pct

Oct 11, 2019 (LBO) – Sri Lanka’s gross official reserves were 7.6 billion US dollars by end September, down from 8.5 billion US dollars in August, latest Central Bank data showed.

Gross official reserves in September provide an import cover of 4.5 months. Meanwhile, the Sri Lankan rupee remains appreciated against the US dollar by 1.3 percent thus far during the year.

“Although the Sri Lankan rupee depreciated against the US dollar in September partly driven by adverse speculation, this trend reversed in October with continued inflows to the foreign exchange market,” the Central Bank said.

“Outflows of foreign investment in the government securities market experienced in August 2019 have ceased thereafter, while the equity market recorded a modest net inflow so far during the year when both primary and secondary market transactions are considered.”

The Central Bank expects a faster reduction in lending rates, responding to the measures already taken by the bank.

In order to induce a faster reduction in market lending rates, the Central Bank imposed caps on lending rates while withdrawing caps on deposit rates of licensed banks.

These regulatory measures, which are to be reviewed by March 2020, together with reduced policy interest rates and the Statutory Reserve Ratio (SRR), are expected to result in a sizable and speedy reduction in lending rates, which will enhance the demand for credit, going forward.