Reserves down by US$ 506mn, FDI falls 9.4%

December 6, 2012

Gross official reserves fell by 7.7 percent month-on-month to US$ 6,547 million as at end October 2012, down US$ 506 million from US$ 7,053 million as at end September 2012, Central Bank data showed.

Currency dealers said the Central Bank had been heavily intervening in the market in recent months in order to prevent the rupee from depreciating beyond Rs. 130 against the greenback.

The Central Bank said yesterday that foreign direct investments during the first nine months of this year reached US$ 614.7 million, down 9.4 percent from a year earlier, while heavy borrowings and short term inflows continue to buoy the balance of payments growing 68 percent to US$ 6,076.3 million.

"With regard to the services account and current transfers in the BOP, earnings from tourism and workers’ remittances continue to cushion the current account of the BOP," the Central Bank said in the ‘External Sector Performance—October 2012’ report released yesterday (Dec. 06).

"While 80,379 tourists visited Sri Lanka in October 2012, thus raising tourist arrivals during the first ten months of 2012 by 16 per cent, year-on-year, to 774,151, earnings from tourism have also grown in parallel, by 22.1 per cent, to US dollars 790.5 million for the ten months ending October 2012.

"Inflows on account of workers’ remittances meanwhile have continued to increase at a healthy rate of more than 24.2 per cent, year-on-year, by October this year. For the first ten months of 2012, workers’ remittances recorded a growth of 17.6 per cent, year-on-year, and amounted to US dollars 4,941 million. Earnings from both tourism and workers’ remittances are expected to record high growth for the last quarter of 2012.

"There have been substantial foreign currency inflows to the capital and financial account of the BOP during the first ten months of 2012. Foreign investments at the Colombo Stock Exchange (CSE) increased to US dollars 268 million, on a net basis, by end October 2012, while there have been a significant increase in foreign investments in Government securities, with net inflows to Treasury bills and Treasury bonds during the first ten months of 2012 amounting to US dollars 846 million.

"Meanwhile, long-term loans obtained by the government during the first ten months of 2012 amounted to US dollars 2,614 million. In addition, long-term borrowings by commercial banks during January-October 2012 amounted to US dollars 973 million.

"Foreign Direct Investment (FDI), including foreign loans obtained by BOI companies, amounted to US dollars 615 million for the first nine months of 2012, with more inflows expected to materialise during the remainder of the year.

"Gross official reserves amounted to US dollars 6,547 million by end October 2012, while total international reserves, which include gross official reserves and foreign assets of commercial banks amounted to US dollars 8,063 million. In terms of months of imports, gross official reserves were equivalent to 4.0 months of imports by end October 2012, while total reserves were equivalent to 4.9 months of imports," the Central Bank said.

Gross official reserves stood at US$ 7,053 million by end September 2012, unchanged from end August 2012.