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USD purchases improve liquidity

USD purchases improve liquidity

22 May 2024 | BY Imesh Ranasinghe

  • Total outstanding market liquidity at a surplus of Rs. 132.8 b by 17 May 

Purchase of excess dollars in the market by the Central Bank of Sri Lanka (CBSL) is improving the rupee liquidity, CBSL Director of Economic Research Dr. Sujeetha Jegajeevan said.

Speaking at a seminar organised by CMA Sri Lanka, she said that when CBSL buys excess dollars from the market by paying up in rupees, it is helping to improve the liquidity conditions in the market.

“Currently, we don't have a problem of excess in liquidity and the current excess in liquidity is at a manageable level,” she added.

According to CBSL data, the total outstanding market liquidity was at a surplus of Rs. 132.8 billion by 17 May, compared to a surplus of Rs. 151.8 billion by the end of a week earlier. The currency in circulation stood at Rs. 1.25 trillion.

CBSL has managed to purchase dollars worth $ 1,620 million in the first four months of 2024 when it has only sold $ 59 million. The lower demand in the forex market has lowered the average daily interbank volume of foreign exchange to $ 19.14 million by the end of last week from $ 64.65 million a year ago.

The total inflows of dollars (exports, tourism and remittances) as of March 2024 stood at $ 5,730.9 million while the outflows(imports) stood at $ 4,397.9 million.

Jegajeevan said that if CBSL feels that the liquidity level in the market is high, “we will be doing open market operations to limit the availability of liquidity by selling through short-term or long-term auctions, so we can absorb liquidity,” she added. 

She said that CBSL makes sure that there is no excess liquidity in the market that will affect the inflation.

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