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Foreign reserves: Significant inflows expected this week: Cabraal

19 Dec 2021

  • Will achieve target of over $ 3 billion inflows by end of the year: Governor
  • Maintaining ‘radio silence’ on source of inflow until received by CBSL
  • Cabinet explores bullion sale option to boost foreign reserves
By Our Political Editor The Central Bank of Sri Lanka (CBSL) is confident of receiving some significant inflows to boost the country’s foreign reserves this week, according to CBSL Governor Ajith Nivard Cabraal. “We are expecting some significant inflows early next week,” he told The Sunday Morning, but refrained from revealing the source of the inflows. “When the inflows are received, we will announce. Until then, I’m afraid we are bound by ‘radio silence’,” Cabraal observed. The CBSL Governor was confident that the fast-depleting foreign reserves will receive a boost before the end of this year. “We will keep to the target of achieving over $ 3 billion in reserves by the end of the year,” Cabraal added. A delegation of officials from the CBSL last weekend engaged in a tour in several Middle Eastern countries, including Qatar, the UAE, and Saudi Arabia. CBSL has also been engaged in negotiations to secure a $ 1 billion swap facility from Qatar. Meanwhile, negotiations with the Indian Government, on finalising the $ 500 million credit line for fuel and the $ 400 million swap facility, that commenced in August and September this year are continuing, and are expected to materialise around January next year. A senior government minister said that despite fears over meeting the country’s debt obligations next month (January 2022), Sri Lanka would not default on the payments. The Sunday Morning learns that the Cabinet of Ministers had last week discussed the possibility of selling the country’s gold reserves to boost the liquidity status of the reserves. The discussion was initiated by Finance Minister Basil Rajapaksa. However, no final decision was reached on the matter at last week’s Cabinet meeting, while several ministers had proposed that the Government seek an expert opinion on the matter. International rating agency, Fitch Ratings, meanwhile stated yesterday (18) that it believed it will be difficult for the Government to meet its external debt obligations in 2022 and 2023 in the absence of new external financing sources. “Obligations include two international sovereign bonds of $ 500 million due in January 2022 and $ 1 billion due in July 2022. The Government also faces foreign currency debt service payments, including principal and interest, of $ 6.9 billion in 2022, equivalent to nearly 430% of official gross international reserves as of November 2021. Cumulative foreign currency debt service, including interest and principal, amounts to about $ 26 billion from 2022 through to 2026,” Fitch had stated. “Sri Lanka’s foreign exchange reserves have declined much faster than we expected at our last review, owing to a combination of a higher import bill and foreign currency intervention by the Central Bank of Sri Lanka. Foreign exchange reserves have declined by about $ 2 billion since August, falling to $ 1.6 billion at end-November, equivalent to less than one month of current external payments (CXP). This represents a drop in foreign currency reserves of about $ 4 billion since end-2020,” the rating agency added. Fitch has downgraded Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to "CC" from "CCC". Fitch typically does not assign outlooks or apply modifiers for sovereigns with a rating of "CCC" or below.


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