Swaps, Gold appreciation boost reserves
By Paneetha Ameresekere
The country’s foreign reserves were boosted by 6.09 per cent (US$ 407.4 million) to $7,102 million last month (July) over June (2020), aided by a $400 million nine month tenure swap with the Reserve Bank of India (RBI), coupled with the appreciation in the value of the island’s gold reserves, Central Bank of Sri Lanka (CBSL) data released on Friday showed.
Consequently the country’s foreign reserves appreciated by 6.09 per cent ($ 407.4 million) to $ 7,102 million in the reference period, statistics showed. Of this $ 7,102 million, the largest pie, Sri Lanka’s foreign currency reserves, aided by the RBI swap with CBSL, appreciated by 5.83 per cent ($ 364 million) to $ 6,605.10 million and its gold reserves by 10.95 per cent ($ 42 million) to $ 425.60 million.
The reason why the country’s foreign currency reserves didn’t appreciate by $ 400 million, equivalent to the RBI swap, but by only $ 364 million is that the difference, $ 36 million, may have had been swallowed up by the country’s foreign debt servicing commitments and/or due to the return of maturing swaps by CBSL to commercial banks, with which it had such dealings.
However, CBSL lacks transparency in that its Friday’s data doesn’t give a detailed account of swap transactions which it had with commercial banks and/or of the Government’s foreign debt servicing commitments in the review period if applicable, thereby leaving the market to hypothesis on such dealings.