Sri Lanka’s gross official reserves were estimated at US dollars 4.1 billion (excluding the swap facility with the PBOC), with an import cover of 3 months, at the end-March 2021, the Central Bank said.
Recently, the Central Bank entered into a bilateral currency swap arrangement with the People’s Bank of China (PBOC) amounting to CNY 10 billion (equivalent to approximately US dollars 1.5 billion).
“Although the Sri Lankan rupee experienced some volatility recently, the continuation of the existing restrictions on non-essential imports and certain foreign exchange outflows, among others, is expected to help cushion pressures in the domestic foreign exchange market,” the Central Bank said.
“The Central Bank and the Government continue to engage with investment and lending partners to secure foreign financing and remain committed to honouring foreign currency debt service obligations on time.”
Meanwhile, the Central Bank reiterates the necessity to maintain the low interest rate structure, amidst the significantly high excess liquidity in the domestic money market, thereby facilitating the take-off of domestic investment.
Inflation is expected to remain subdued in the near term and any upward pressures over the medium term could be mitigated, to a large extent, by the envisaged supply-side improvements, the Central Bank said.
Credit to the public sector, particularly net credit to the Government, from the banking system continued to grow, resulting in a notable expansion of domestic credit and an acceleration of broad money growth.