Central Bank to diversify reserve management

Tuesday, 26 August 2014 02:03 - - {{hitsCtrl.values.hits}}

Signs agreement with People’s Bank of China to access one of the world’s largest securities markets

The Central Bank has entered into an agreement with the People’s Bank of China to diversify its reserves management activities into Chinese Renminbi denominated assets, it said in a statement yesterday.

The Central Bank of Sri Lanka and the People’s Bank of China entered into a Bilateral Investment Agreement on Bond Investment yesterday, which enables the Central Bank of Sri Lanka to further diversify its reserves management activities into Chinese Renminbi denominated assets. “As a result, the Central Bank of Sri Lanka could now access one of the largest and growing securities markets in the world, while also enhancing the cooperation between the two central banks, and the two countries,” the statement added. Central Bank Governor Ajith Nivard Cabraal exchanged the Bilateral Investment Agreement with People’s Bank of China Governor Zhou Xiaochuan at a special signing ceremony held at People’s Bank of China, Beijing. Sri Lanka Ambassador to the People’s Republic of China Ranjith Uyangoda was present at this occasion. Further, Deputy Governor Dr. Nandalal Weerasinghe, Director International Operations, H. A. Karunaratne, and Superintendent of Public Debt, N. W. G. R. D. Nanayakkara representing the Central Bank of Sri Lanka and several senior officers of the People’s Bank of China also participated at the ceremony. “Sri Lanka’s gross official reserves, including the Asian Clearing Union (ACU) balances, reached a level of $ 9.2 billion by end June 2014, while total foreign assets, which include foreign assets of the banking sector as well, amounted to $ 10.7 billion by end June 2014,” the Central Bank’s latest external performance report said. In terms of months of imports, gross official reserves were equivalent to 6.1 months of imports by end June 2014, while total foreign assets were equivalent to 7.2 months of imports. The Central Bank in 2011 paved the way for Renminbi transactions at local banks following increased flow of Chinese funds into the country as part of loans given by the Chinese Government to its Sri Lankan counterpart. Since Sri Lanka ended a 30-year war in 2009 China has emerged at the island’s largest loan provider with an estimated total of $ 6 billion being funneled into massive infrastructure projects. Some of the biggest projects include a $ 1.3 billion coal power plant on the north western shore as well as a host of other investments in the south of the country that are estimated to exceed $ 4 billion, including a $1.2 billion harbour. China is also the third largest source of tourists to Sri Lanka. In the first six months of 2014 Chinese arrivals jumped a significant 137.2% to 52,230 travellers compared to 22,023 in the same period last year, according to latest data from State-run Tourism Development Authority (SLTDA).