Author: Don Obrien

Sri Lanka forex reserves down to US$2.5bn in September

ECONOMYNEXT – Sri Lanka’s gross official reserves fell to 2,581.3 billion US dollars in September 2021, from 3,543.5 billion in July official data showed, amid continued liquidity injections.

Sri Lanka’s gross forex reserves were 7.05 billion US dollars in July 2021 when inflationary policy (liquidity injections began) and the central bank lost its ability to collect forex reserves.

Policy deteriorated dramatically from around February 2020 as Treasury bill yields started to rise and taxes were cut in December 2019.

Price controls on Treasury bill were place in April 2021, and money was printed outside of auctions.

Sri Lanka was hit by a 2.3 billion US dollar balance of payments deficit in 2020 and 2.7 billion US dollars by July 2021, not counting the latest reserve losses.

Sri Lanka has lifted price controls on Treasuries auctions. Though volumes are smaller money is still being printed. (Colombo/Oct09/2021)

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