According to the Central Bank of Sri Lanka (CBSL), the level of gross official reserves is anticipated to have topped USD 3 billion as of May 31, 2023.
This includes the swap facility from the People’s Bank of China, worth around USD 1.4 billion and subject to usage restrictions.
The Central Bank said in its most recent Monetary Policy Review that it has steadily increased gross official reserves by absorbing a sizable quantity of foreign currency from the local FX market so far in 2023.
The recent improvement in FX liquidity can also be attributed to the resurgence of foreign investors’ interest in short-term government securities.
The exchange rate, which is left up to market forces, continues to reflect a bullish market outlook, which is supported by an increase in liquidity on the local foreign exchange market.
The Central Bank stated that it lowered the cash margin deposit requirements imposed on some imports in May 2023 in order to reflect the better balance of payments (BOP) conditions, and it gave the assurance that more steps would be taken to loosen capital flow restrictions in the coming years.
