Nov 04, 2020 (LBO) – Gross official reserves decreased to US dollars 6.7 billion by end September 2020, compared to US dollars 7.6 billion recorded at end 2019, the Central Bank of Sri Lanka said.
The Bank said in its latest report on “Recent Economic Developments: Highlights of 2020 and Prospects for 2021″ foreign currency debt service payments, mainly principal payments of foreign project loans, foreign currency term financing facility repayments, Sri Lanka development bonds (SLDB) and foreign currency banking units (FCBU) loan repayments and interest payments, were the main reasons for the decline in gross official reserves during the nine months ending September 2020.
Further, the repayment of a matured ISB of US dollars 1 billion was also facilitated by utilising gross official reserves in early October 2020.
Main inflows to supplement reserves were the receipt of foreign currency term financing facility of US dollars 500 million, FCBU loans of US dollars 670 million, and the receipt of SAARC FINANCE swap arrangement of US dollars 400 million.
Accordingly, gross official reserves were sufficient to cover 4.6 months of imports and 49 per cent of the country’s short term debt and liabilities by end September 2020.
Meanwhile, total international reserves, which comprise gross official reserves and foreign assets of the banking sector decreased marginally to US dollars 10.3 billion by end August 2020 from US dollars 10.4 billion at end 2019 (data available for end August 2020).
This decrease was a combined effect of a decrease in gross official reserves by US dollars 212 million during the eight months ending in August 2020 and an increase in holdings of commercial bank foreign assets by US dollars 156 million. By end August 2020, the import coverage of total international reserves was equivalent to 7.2 months.
Wider current account deficit and reduced inflows to the financial account led to a deficit of the overall balance of BOP during the nine months ending in September 2020.
Reflecting the decline in the reserve position primarily due to debt repayments, the overall balance recorded a deficit of US dollars 1,104 million by end September 2020, in comparison to a surplus of US dollars 377 million at end 2019.
The Sri Lankan rupee has remained broadly stable thus far in 2020, in spite of a sharp depreciation experienced in March and April due to speculative pressure driven by uncertainties associated with the COVID-19 pandemic.