Central Bank Governor Nivard Cabraal

The Central Bank of Sri Lanka in a statement assured the general public that the measures being taken at present would ensure that by end of 2021 official reserves will remain above $ 3 billion. 

“The Government and the Central Bank remain confident that expected inflows will materialise and the reserve position will remain at comfortable level throughout the year 2022,” the statement added.

The CBSL said that despite the headwinds of the economic impact of COVID-19 and challenges posed by adverse developments in the external sector, the Sri Lankan economy had shown resilience throughout 2021, adding that Sri Lanka had also successfully met its debt obligations by repaying foreign loans, including the payments of the International Sovereign Bonds. 

Since the beginning of the year both the Central Bank and the Government have been actively pursuing possible avenues to replenish official reserves, with an emphasis on encouraging non-debt flows, so that the existing foreign debt could be managed in a sustainable manner. 

These efforts were accelerated since October 2021 with the announcement of the Six-Month Road Map for Ensuring Macroeconomic and Financial System Stability, which set out envisaged targets for build-up of official reserves in the near term.

CBSL said that, as articulated in the Six-Month Road Map, a number of foreign exchange inflows were envisaged in the very near term. 

Major foreign exchange inflows to the Central Bank include SWAP facilities with Middle Eastern and other regional central banks amounting to about $ 2 billion. 

The Government is also in the process of securing government-to-government financing, syndicated loans as well as loans from multilateral organisations. 

In addition, the expected foreign exchange facilities that were negotiated during high-level visits abroad made by authorities are also said to be progressing well. 

Further, CBSL said that the interventions made by the Central Bank on several facets of the foreign exchange market, such as incentive scheme introduced for workers’ remittances, and the repatriation and conversion requirements on account of exports proceeds, would improve the liquidity in the domestic market, thereby enabling the Central Bank to build up official reserves further. 

With the recent rise in departures for foreign employment and exponential growth observed in tourist arrivals, the external sector is expected to recover well in the period ahead, according to CBSL, and the pressures observed at present are expected to moderate with increased inflows to the economy. 

“The Government and the Central Bank remain confident that these expected inflows will materialise, and the reserve position will remain at a comfortable level throughout the year 2022,” the statement added.

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