Reserves Further Strengthened

Central Bank of Sri Lanka (CBSL) continued to weaken the benchmark ‘spot’ for the second consecutive market day to today by persisting in buying US dollars from the market to strengthen the country’s parlous foreign reserves, sources who didn’t want to be named told ‘BMD.’

Subsequently the ‘spot,’ today over yesterday (Thursday ) fell by 0.16 per cent (50 cents) to be trading at Rs 306.50/307.00 to the dollar in two way quotes. A weak ‘spot’ causes cost-push inflationary pressure as Sri Lanka is an import dependent economy.

Nonetheless, year on year (YoY) to today, the ‘spot’ has steeply gained by between Rs 53.50-58.00 (14.86-15.89 per cent) to the dollar in two way quotes, data showed. A year ago the ‘spot’ was trading unchanged for the third market day to 19 May 2022 at Rs 360/365 to the dollar in two way quotes, statistics also showed.

Meanwhile CBSL strengthened the official ‘spot’ for the thirteenth consecutive market day to today, this time too, sharply by 0.52 per cent (Rs 1.59) to Rs 305.78 to the dollar. In other developments, a year ago, CBSL artificially strengthened the administered ‘spot’ for the third consecutive market day, this time also by 0.03 per cent (Rs 0.10) to Rs 359.55 to the dollar, nonetheless resulting in a steep YoY strengthening of the official ‘spot’ by 14.95 per cent (Rs 53.77) to the dollar by today.

‘Spot’ trades are settled after two market days from the date of trading. CBSL the steward of Government of Sri Lanka (GoSL) debt and of its foreign reserves deals in the official ‘spot.’ The official ‘spot’ is usually artificially propped up to minimize the cost of GoSL’s foreign debt in rupee terms and also to minimize GoSL’s foreign debt servicing costs in rupee terms.