Central Bank emphatic dollars are coming

Thursday, 22 March 2012 01:53 - - {{hitsCtrl.values.hits}}

The Central Bank yesterday was emphatic that much needed dollars are coming to Sri Lanka and the foreign exchange market, reassuring that stability was on course.

In an apparent reaction to widespread criticism including that of UNP MP Dr. Harsha de Silva’s claim that the robust inflows projected under the Central Bank’s 2012 and beyond roadmap presented early this year, the monetary authority said foreign currency inflows have increased substantially in recent weeks.

“As projected in the Central Bank of Sri Lanka Road Map, foreign currency inflows to the country increased substantially in recent weeks. These were from several sources,” the Central Bank said. It said firstly there were significant inflows to the Colombo Stock Exchange, with the net inflows to the CSE so far in 2012 amounting to $ 164 million.

Secondly there were inflows in respect of investments in several commercial banks, amounting to about $ 127 million during this week. Thirdly investments in Sri Lanka Development Bonds (SLDBs) were made to the value of $ 87 million, comfortably exceeding the $ 45 million, that was maturing and was on offer for re-investment.

Fourthly net investments of $ 385 million in Treasury Bills and Bonds were made by foreign investors so far in 2012.

“A significant part of above inflows was absorbed by the Central Bank, thereby adding to the gross official reserves of the country,” the statement added.

Further the Central Bank also said foreign currency inflows are expected in the next few weeks, which would include inflows as a result of several commercial banks raising funds abroad for their Tier 2 capital, and an initial investment of approximately $ 73 million in a mega hotel project.

“The Central Bank also wishes to indicate that in response to the recent policy measures implemented by the Central Bank and the government, there are clear signs of deceleration in private sector credit growth and import demand,” it said.

“A further moderation is expected once the New Year seasonal demand for imports is over, thereby substantially easing the deficit in the trade account. The increasing foreign currency inflows, and the easing of the import demand as stated above, are expected to stabilise the foreign exchange markets in the coming weeks,” the Central Bank emphasised.

In a statement after the US dollar exchange rate hit an all time high of Rs. 130 on Monday, UNP MP Dr. De Silva said: “We warned on numerous occasions throughout the last year that the policies adopted by the completely politicised Central Bank were detrimental to the sustained progress of the economy. We agreed with other independent economists that a crisis in the external account was brewing and that immediate corrective action had to be taken with interest rates and exchange rate policies to reduce the blow to the people of this country.”

“As a responsible Government, what is required is a frank evaluation of the policies in play and a determination of what has to change. The UNP has never found fault with the professionals at the Central Bank, but only the completely politicised decision making process adopted by the Governor,” Dr. De Silva’s statement urged.