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Cabraal vows to grow reserves back to over $ 7 b in months

27 Jul 2021

  • Reserves fall to $ 3 b after $ 1 b bond payment
  • Says cash flow more important than reserves level
Amidst widening speculation on the Sri Lankan Government’s dwindling foreign exchange levels following the $ 1 billion International Sovereign Bond (ISB) payment made yesterday (26), State Minister of Money, Capital Markets, and State Enterprise Reforms Ajith Nivard Cabraal issued a statement noting that within the next few months, the reserves would rise to over $ 7 billion. Noting that the current foreign reserve balance stands around $ 3 billion, the State Minister expressed his optimism about strengthening the reserves, highlighting that when considering the expected inflows and outflows, the available reserves would exceed the aforementioned figure. “It must be stressed that what is most important is the cash flow, not the reserve level, at a given time. Experienced finance managers will keep a close watch on the cash flows as they very well know that temporary fluctuations in the reserve level may occur, but that no instability will be caused if the cash flow is managed successfully.” The Government yesterday settled a $ 1 billion ISB payment that was issued in July 2011, as it reaches its maturity today (27). Explaining further, he noted that with the repayment of the ISB on 27 July 2021, most of the Government's foreign debt service obligations for 2021 would have been repaid, allowing the country to replenish its reserves during the remainder of the year. Cabraal further noted that Sri Lanka has worked out its external cash flows in a manner so that every foreign exchange loan repayment and interest payment will be made on time, through the careful management of its existing reserves, as well as expected inflows and outflows.  Listing out the inflows, he added that the inflows over the next three months, as per the country’s forex pipeline, amount to nearly $ 2,650 million, which include a swap facility from India worth $ 400 million, a swap from Bangladesh worth $ 250 million, a loan from China Development Bank worth $ 300 million, a Special Drawing Rights allocation from the International Monetary Foundation (IMF) worth $ 800 million, Central Bank purchases from the Forex market in the next three months amounting to $ 200 millon, inflow from ISBs held by local banks totalling $ 300 million, and expected inflows from the utilisation of under-utilised assets totalling $ 400 million. He added that the Central Bank of Sri Lanka has also successfully negotiated a swap with the People's Bank of China of a sum of $ 1,500 million, which too, can be accessed; and hence could be included as a part of its effective reserves. “In addition, arrangements are being made to roll-over almost the entirety of the SLDB and FCBU loans that are maturing over the balance part of the year, so that such maturities will not lead to a reduction in reserves,” noted Cabraal.


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