Sri Lanka’s forex reserve fall after a July sovereign bond payment will be temporary and will be boosted later with other inflows, including investments into under-utilized government properties State Minister for Money and Capital Markets Nivard Cabraal said.
“Any reserve fall will be temporary. It will be buttressed in a planned manner with non-debt investments, which will not flow out,” Minister Cabraal said.
“We have built reserves to use when there are shortfalls. Otherwise, there is no need for reserves.”
Sri Lanka had about 4.0 billion dollars of gross official reserves of which a billion US dollars flowed out for bond payment on July 26. However about 200 is expected to be recouped with swaps from the domestic holders of bonds who hold about 310 million US dollars, Minister Cabraal said. It is the practice for analysts to measure reserves in months of imports.
There was also a 250 million US dollar swap with the Bangladesh Bank, a 400 million dollar swap from the Reserve Bank of India and an 800 million US dollar special drawing rights allocation was also expected from the IMF.
Remittances are expected to be stronger than last year and exports were also recovering. The central bank will buy a part of the inflows Minister Cabraal said. The central bank has placed a surrender requirement on export proceeds and remittances.
Officials have said they are expecting to get 650 million to 700 million dollars from surrenders this year. However the focus was to get non-debt inflows investments, Minister Cabraal said.
Sri Lanka has readied 42 projects involving under-utilized state land and public-private partnerships. These included the General Post Office, the Grand Orient Hotel and Narahenpita Tractor Corporation land where investors were interested, he said. The projects had the potential to bring around 700 million to 1,000 million dollars, he said.
“We will bring inflows other than debt, which will not flow out,” Cabraal said. Sri Lanka also has a 1.5 billion US dollar equivalent swap facility from the People’s Bank of China and a 300 million dollar equivalent loan expected from the China Development Bank.