Friday Dec 13, 2024
Friday Dec 13, 2024
Friday, 13 January 2012 10:47 - - {{hitsCtrl.values.hits}}
Central Bank Governor Nivard Cabraal has been increasingly under attack by UNP MP Dr. Harsha de Silva over some of the policies, actions and comments of the professional-turned-politician-turned-Chief of the monetary regulatory authority. Cabraal’s ambitious and robust Roadmap for 2012 and beyond too had come under critique as being overconfident. However, this is unlikely to ruffle Cabraal, whom some have credited for a job well done.
That apart, the tug-of-war between the CB Chief and Treasury Secretary Dr. P.B. Jayasundera over exchange and interest rates is well known as well. Though some may wish, Cabraal is not readying for battle – instead, an office aid is helping him wear his jacket before a Reuters interview on Wednesday, the same day, which the Daily FT (a copy of which is topmost on his desk) incidentally featured UNP MP Dr. de Silva’s interview, highlighting the latter’s concerns as well as the battle between the Heads of the CB and Treasury – Pic by Dinuka Liyanawatte
Reuters: Sri Lanka’s Central Bank on Thursday said it expects dollar inflows in the next two months to soften depreciation pressure on the rupee, which it will still defend despite International Monetary Fund pressure to stop managing the currency.
The Central Bank has spent more than $ 850 million propping up the rupee since President Mahinda Rajapaksa ordered a surprise three per cent devaluation on 21 November.
Since then, dealers say the Central Bank on average has been selling $ 25 million a day to hold the rupee at 113.89/90 a dollar.
The IMF last year warned that central bank intervention was threatening the non-borrowed foreign exchange reserve position, and withheld the eighth tranche of a $ 2.6 billion loan as a result.
Central Bank Governor Ajith Nivard Cabraal told Reuters in an interview that he saw depreciation pressure waning within a “maximum month or two months”.
“We see a large inflow coming in,” Cabraal said. “Ours is a measured intervention, which is going to be on both sides. In three months, (people) will be asking me ‘Why are you buying dollars?’”
The Central Bank is negotiating a $ 1 billion long-term loan to finance petroleum imports, and is expecting another $ 500 million soon from long-term currency swaps, Cabraal said without elaborating.
Sri Lanka is targeting $ 25 billion in inflows in 2012, a 31 per cent increase from the $ 19 billion in 2011.
Although the $ 59 billion economy was forecast to have grown by eight per cent last year, Sri Lanka is expected to have recorded a balance-of-payments deficit in 2011.
Foreign exchange reserves fell around 27 per cent in the last five months of 2011 to $ 6 billion, the cost of supporting the rupee while many other Asian peers let their currencies fall.
An IMF team is due in Sri Lanka on 25 January to review Sri Lanka’s performance under the loan programme, and sources close to the global lender have said it will not release any more money until the central bank allows more rupee flexibility.
