SL sees small dip in forex reserves in Feb

Friday, 11 March 2022 03:09 - - {{hitsCtrl.values.hits}}

REUTERS: Sri Lanka’s central bank said foreign currency reserves dropped to $2.31 billion by the end of February, a level that could provide a month’s breather in efforts to lure investment and curb imports to ensure debt repayments during the year.

The news follows Monday’s move to devalue the currency by up to 15%, which analysts see as one of several steps key to wooing IMF funding, although there is no such official move.

The reserves dipped 2% from $2.36 billion at the end of January, the central bank said in its latest external sector update, to reach their lowest since October’s figure of $2.26 billion.

“Effectively the amount of useable reserves is much less than the overall number,” said CAL Group Chief Strategist Udeeshan Jonas. “Unless they are able to find funding we have about a month’s breathing space.” A key part of the $2.31-billion reserves is denominated in yuan which may not be convertible into dollars.

The exact share of useable reserves is unclear, but several analysts believe the island nation may need to seek some sort of a bailout or program from the International Monetary Fund. Sri Lanka is due to repay debt of about $4 billion over the rest of the year, including a $1-billion international sovereign bond that matures in July. Some pressure on reserves has eased after Sri Lanka received a two-month deferral on a payment of $900 million to the Asian Clearing Union (ACU), analysts said.