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Tuesday, 11 January 2022 03:41 - - {{hitsCtrl.values.hits}}
The Central Bank yesterday issued a statement clarifying the composition of official reserve position following different interpretations by economists and Opposition MPs.
CBSL said international reserve management of a Central Bank is a dynamic and technical process which is usually designed to ensure that a country’s foreign assets are readily available and controlled to achieve a defined range of objectives.
Accordingly, the adoption of appropriate reserve management policies relating to the asset composition, currency mix, liquidity needs, tenor, profitability, safety, etc. of investment instruments could vary from country to country and would depend on the country-specific circumstances and economic priorities.
In this background, CBSL said its attention has been drawn to several misleading and erroneous interpretations regarding the change in the composition of the CBSL’s international reserve position as at end December 2021.
Accordingly, the CBSL wishes to clarify that the changes in the composition of official reserves is in accordance with the current reserve management needs and priorities, considering all aspects of the reserve management requirements, as set out above.
“In fact, the CBSL’s gold holdings by end 2008 was only $ 92 million (3.6% of gross official reserves of $ 2.6 billion), but was gradually increased by end 2014 to $ 893 million (10.9% of gross official reserves of $ 8.2 billion). Hence, it is evident that the share of gold holdings in the reserve may change from time to time, reflecting the needs of the CBSL to buy, hold or liquidate its gold holdings in accordance with the prevailing reserve management priorities,” the statement said.
In that background, CBSL said whilst its gold holdings by end 2021 may have decreased to $ 175 million (5.6% of gross official reserves of $ 3.1 billion) based on the need to enhance the liquidity of the reserve portfolio, the CBSL may, at a future date, consider increasing its gold holdings when the foreign reserve levels grow to values that may warrant a change in the composition of the reserve portfolio.
