Central Bank to reveal progress of forex boosting measures

Tuesday, 30 November 2021 03:20 - - {{hitsCtrl.values.hits}}

Central Bank Governor Nivard Cabraal last week expressed confidence in measures announced in the short term roadmap in October to boost forex reserves and is expected to make public the progress shortly.

The roadmap listed that between October and December $ 2.8 billion inflows via Government initiatives and a further $ 2.2 billion by measures by the Central Bank, would be seen. Separately $ 800 million inflows were listed to the banking sector. The Central Bank expected $ 6.15 billion in inflows via exports, workers remittances, services exports and tourism also within three months.

However, with nearly two months gone, private sector and forex markets have been questioning the credibility of the announcement and the whereabouts of the purported inflows.

In response to a query at the media briefing following the November monetary policy review, Cabraal said that the announced measures were underway and at an advanced stage of negotiations, pending finalisation, but that he could not yet reveal. However he assured to make the progress public by the end of November.

He also said the Government and the Central Bank were confident of boosting reserves as well as honouring immediate foreign debt commitments, including $ 500 worth International Sovereign Bonds (ISBs) maturing in January.

The Central Bank last week said gross official reserves were estimated at $ 2.3 billion by end-October. This, however, does not include the bilateral currency swap facility with the People’s Bank of China (PBoC) of CNY 10 billion (equivalent to approximately $ 1.5 billion). “We will cash the CNY10 billion if and when needed,” Cabraal added.

In its post-monetary policy review statement, the Central Bank reiterated measures taken by it and the Government to attract fresh forex inflows, as well as the anticipated inflows to the private sector, including the financial sector, that are expected to augment gross official reserves, thereby strengthening the external sector in the period ahead.

“Specifically, a greater conversion of export proceeds is observed, while negotiations with the foreign counterparts of the Government and the Central Bank are progressing, broadly in line with the path envisaged in the six-month Road Map,” it added.

Responding to calls by the Opposition and some economists that Sri Lanka should go to the IMF for support, Cabraal said that within the Government different views had been expressed but that the stand so far was that the country doesn’t need to resort to IMF support.

“We have been doing some of the measures which the IMF would have prescribed, such as lifting price controls on essential items, etc., in addition to opting for other sources of funding which doesn’t demand extreme reforms or depreciate the rupee,” he said, adding that the Government has been working on ensuring economic growth with stability amidst the COVID pandemic and other external and internal shocks.

Cabraal also said that between 2018 and June 2019, the previous Government had borrowed $ 6.9 billion via ISBs, thereby increasing the total outstanding at $ 15 billion, whereas as at end-2014 the ISBs amounted to only $ 5 billion. “Nevertheless we have honoured all debts and we will continue to do so in the future as well,” he said. “Markets nor anyone should have doubts, though they keep fearing and speculating default every now and then.”