CB to receive $ 1 b forex next month from Saudi

Thursday, 7 January 2016 00:10 - - {{hitsCtrl.values.hits}}

By Charumini de Silva

Central Bank Governor Arjuna Mahendran yesterday confirmed an inflow of foreign exchange nearing $ 1 billion from Saudi Arabia in February to bolster reserves and shore up a troubled currency.

The boost to reserves was a result of the Central Bank inviting Saudi banks to invest part of their reserves in Sri Lanka by linking up with Sri Lankan banks.

A top level delegation of Sri Lankan bankers led by Mahendran visited Saudi Arabia in December to explore new areas of cooperation with the Kingdom.

“These banks have strong reserve bases which they like to invest all over the world. We invited Saudi banking institutions to link up with our banks to channel funds. Within the next month I expect about $ 500 million to $ 1 billion foreign exchange to come to Sri Lanka,” he told the Daily FT.

At a time when Sri Lanka is opening up to financial markets, Mahendran explained that it would be strategically important to Sri Lanka to attract and facilitate investments of this nature.

“Foreign bank partnerships are expected to play a greater role in economic activities and make a significant contribution to the economy. This will bring in foreign currency into Sri Lanka and at the same time will help to build up our official reserves,” he pointed out.

The Governor noted Sri Lanka’s official reserves had risen from $ 6.5 billion to a little over $ 7 billion in December 2015 as a result of borrowed money from markets and remittances coming into the system.

In order to assist over 550,000 Sri Lankans working in Saudi Arabia who remit some SR 10 billion annually, Mahendran said he was negotiating with the Saudi Arabian Monetary Agency (SAMA) Governor to enable Sri Lankans’ remittances from Saudi Arabia to reach banks in Sri Lanka directly.

“SAMA has responded positively to consider opening the payment gateway to enable this service in a year or two,” he added.

Representatives from leading banks such as Bank of Ceylon, People’s Bank, Commercial Bank, HNB, NDB, Amana, Seylan Bank, Sampath Bank and Deutsche Bank AG accompanied the Governor during his visit in December.