COLOMBO: Sri Lanka’s foreign reserves this April slipped 1.4 percent compared to March 2017, to US $ 5.05 billion, just ahead of the government executing its plan to raise reserves to double digit levels by the end of this year. Currency reserves fell 2.2 percent to 4.07 billion in April compared to March, while there was a slight offset from gains in the country’s gold reserves, increasing 2 percent to US $ 906.57 million in the same period. There was renewed foreign interest in the Colombo Stock Exchange during the month to support the reserves. Despite numerous debt-raising activities to increase the country’s reserves, they have fallen from over US $ 7.2 billion at the start of 2016, generating alarm among economists who stated that without reforms to raise exports and investor confidence, reserves would continue to dwindle.
The third tranche of the US $ 1.5 billion Extended Fund Facility from the International Monetary Fund (IMF) was delayed this April due to the country’s inability to meet the programme’s reserve targets for 2016. The government says it is now on track to raising the country’s reserves to double digits, with the first action–a US $ 1.5 billion sovereign bond–completed last week. The government is hoping that the moneys from the sale of shares of the Hambantota port, a US $ 1 billion syndicated loan and development bonds with a US $ 3 billion borrowing limit this year, will raise reserves past US $ 10 billion.
However, the government has not yet managed to introduce the reforms necessary to create a competitive export sector, which has placed pressure on the trade account of the balance of payments’ current account and foreign reserves. However, the trade deficit is offset by the rising inflows from worker remittances and tourism earnings. Finance Minister Ravi Karunanayake recently accused the international fund, Templeton, of economic sabotage by stating that it was politically motivated to divest Sri Lankan government securities in order to cause a plunge in foreign reserves.
