Sri Lanka reserves improve to USD 8.9bn by end June; YTD rupee appreciation 4.1-pct

July 11, 2019 (LBO) – Sri Lanka’s gross official reserves have reached 8.9 billion US dollars by end June 2019, following the receipt of 2 billion US dollars from the issuance of ISBs, providing an import cover of 5.1 months, the Central Bank said.

The successful issuance of the International Sovereign Bonds (ISBs) in June 2019 reflected investors’ continued confidence on Sri Lanka’s medium-term growth prospects.

The contraction in the trade deficit and the receipt of the proceeds from the ISBs, along with the continuation of the IMF program have eased the pressure on the exchange rate, resulting in the rupee recording a cumulative appreciation of 4.1 percent against the dollar thus far in 2019.

This appreciation of the rupee has partially corrected its sharp depreciation observed in late 2018.

The continued growth of exports along with the sharp decline in imports led to a further contraction in the trade deficit during the first four months of 2019.

In relation to other inflows to the current account, earnings from tourism suffered a setback following the April terror attacks, while inflows from workers’ remittances remained moderate.

The Central Bank further said a sizable downward adjustment in market lending rates is expected in the near term and private sector credit to pick up gradually towards the latter part of 2019.