Lanka’s forex reserve increases to US$ 7.9 bn in February

Sri Lanka’s forex reserve assets increased to US$ 7.9 billion in February 2018, above the average four month import bill value of US$ 7.4 million

Meanwhile during the period the CBSL has offered and accepted SLDBs 50% lower than its maturity. The delay in issuance of much anticipated US$ 2 billion Sovereign Bond and extending the closing date of Foreign Currency Term Financing Facility coupled with heavy net foreign outflow from capital markets; both equity and debt amounting to over US$ 100 million has resulted in the continuous widening of trade deficits.

The above factors are likely to result in a considerable dip of approximately US$ 300-400 million in forex reserves, bringing the reserves very close to the minimum level, which is four months of imports (which is US$ 7.4 million), thus significantly aggravating the economic risk profile of the country.

However, private sector credit growth continues to be sluggish with no signs of acceleration and inflation (even if a fuel price hike is incorporated ) is expected to be within the bands of 4%-6%.

GDP growth for 4Q-2017 released in March 2018 saw growth continuing to be below par at 3.2% even slower growth than the previous consecutive quarter (3Q) of 3.7%.