COLOMBO – Official data show Sri Lanka’s central bank has bought US$ 49 million from foreign markets in October 2020 to maintain a pegged exchange rate and prevent its appreciation, while selling US$ 1.5 dollars to keep the rupee from falling.
In September the central bank bought US$ 56 million and sold US$ 1.25 million to maintain the peg at around 184/85 to the US dollar.
Sri Lanka has injected liquidity large volumes of cash into money markets but domestic credit has been weak or negative, though credit started to pick up in September and October.
Consumption had been weak amid coronavirus controls and weak credit, while some imports are banned.
In August the central bank bought US$ 121 million from forex markets. Inflows and outflows into the government are not reflected in the data.
In October US$ 1 billion sovereign bond was settled, in part with monetary reserves.
Sri Lanka’s gross official reserves, which also include fiscal reserves, dropped to US$ 5,858 million in November 2020 from US% 6,666.3 million a month earlier.
Sri Lanka’s central bank has borrowed US$ 400 million from the Reserve Bank of India shore up central bank reserves.