Cabraal promises annual CBSL Road Map before April

  • Till then, Six-Month Road Map in effect

BY Shenal Fernando

The annually published Road Map by the Central Bank of Sri Lanka (CBSL) for the year 2022 will be announced only by end-March, after the special Six-Month Road Map announced in October 2021 comes to an end, The Morning Business learns.

Speaking to us yesterday (3), CBSL Governor Ajith Nivard Cabraal claimed: “The Road Map announced on 1 October 2021 covers the period from 1 October 2021 to 31 March 2022. The next Road Map will be announced just before 1 April 2022.”

The CBSL has announced an annual Road Map at the beginning of each year since 2008, setting out the monetary and financial sector policies for the year. However, in October 2021, the CBSL announced an additional Six-Month Road Map for ensuring macroeconomic and financial stability in order to address concerns regarding the shortage of foreign exchange in the domestic market, fears about a sharp depreciation of the Sri Lankan rupee, and rising concerns about debt sustainability, particularly with the large outstanding values of International Sovereign Bonds (ISBs).

The Six-Month Road Map states that a “one-year horizon” from 1 January 2022 to 31 December 2022 will be announced by 4 January 2022. Despite numerous attempts to find the current progress of this initiative, we were unable to do so.

In its Six-Month Road Map, the CBSL had disclosed that it would be receiving $ 11.45 billion in forex inflows over the period of October to December. From the above targeted foreign inflows, the Government of Sri Lanka and the CBSL will negotiate for $ 3.9 billion, and the remaining $ 6.95 billion involves forex inflows to the domestic forex market, with contributions mainly from merchandise exports ($ 3.3 billion), worker remittance ($ 1.8 billion), and service exports ($ 1 billion).

However, it appears that these targeted inflows have not been realised because the official foreign reserve of the country fell to a 12-year low of $ 1.6 billion in November from $ 2.3 billion in October. Although the country’s reserve position was strengthened to $ 3.1 billion in December, this was due to the CBSL drawing the ¥ 10 billion (equivalent to $ 1.5 billion) currency swap signed with China in March 2021.

This currency swap wasn’t a targeted inflow under the CBSL Six-Month Road Map, as it had already been obtained at the time the Road Map was announced. Furthermore, the targeted inflows make provision for only $ 1 billion in inflows during the October-December period via swaps. Therefore, this clearly indicates that a significant portion of the targeted inflows under the Six-Month Road Map haven’t been achieved.

The Morning Business made numerous attempts to obtain a comment from the CBSL with regard to these targeted inflows, but was unable to obtain any clarification.