Official reserves stood at US$ 5,730 million as at end March 2012.
Official reserves which stood at US$ 5,806 million as at end January 2012, dipped to US$ 5,522 million by the end of February. Reserves stood at US$ 8.1 billion as end June 2011 and US$ 5,958 million as at end 2011, with the Central Bank selling dollars to keep the rupee strong amidst a widening trade deficit.
The Central Bank sold down reserves to the tune of nearly US$ 3 billion from July 2011 to January 2012 in order to prop up the exchange rate with the trade deficit expanding nearly 100 percent last year with higher than expected credit growth fuelling import demand. The exchange rate was allowed to float since February, but Central Bank intervention in the foreign exchange market continued, although muted, as these pages previously reported.
"Gross official reserves amounted to US dollars 5,815 million by end May 2012, while total international reserves, which include gross official reserves and foreign assets of commercial banks amounted to US dollars 7,695 million. In terms of months of imports, gross official reserves were equivalent to 3.4 months of imports by end May 2012 while total reserves were equivalent to 4.5 months of imports. In the meantime, with the receipt of the ninth and final tranche of US dollars 415 million under the Stand-by Arrangement (SBA) facility and the proceeds of the fifth international sovereign bond of US dollars 1,000 million, gross official reserves are expected to increase substantially by end July 2012," the Central Bank said in a statement yesterday.
"There have been substantial foreign currency inflows to the capital and financial account of the balance of payments during the first half of 2012. Foreign direct investment (FDI) inflows to major projects during the first five months of 2012 are estimated at US dollars 437 million," it said.
"Investments at the Colombo Stock Exchange increased by US dollars 187 million, on a net basis, by end June 2012.
"In addition, long-term borrowings by commercial banks during January-June 2012 amounted to US dollars 927.5 million.
"A significant increase has also been seen in foreign investments in Government securities, with net inflows to Treasury bills and Treasury bonds during the first six months of 2012 amounting to US dollars 441 million. Further, long-term inflows to the Government amounted to US dollars 633 million during the first five months of 2012," the Central Bank said.
Inflows to the government grew 83.2 percent to US$ 1,746.1 million as at end May 2012, from US$ 952.9 million a year earlier.
Analysts said foreign investors are making a comeback to capitalize on rising interest rates.
"With respect to inflows to the services account of the balance of payments, earnings from tourism in May 2012 grew at a healthy rate of 20.6 per cent, year-on-year, to US dollars 57 million, while during the first five months of 2012, earnings from tourism grew by 24.9 per cent, year-on-year, to US dollars 397 million. Tourist arrivals in May 2012 increased by 17.5 per cent to 57,506, raising tourist arrivals during the first five months of 2012 to 387,622. Workers’ remittances continued to grow at a robust rate of over 20 per cent, year-on-year, to US dollars 507 million in May 2012, while cumulative inflows on account of workers’ remittances during the first five months of 2012 increased by 17.7 per cent to US dollars 2,475 million. Hence, net current transfers continued to help cushion the current account of the balance of payments," the Central Bank said.