As projected in the Central Bank Road Map, foreign currency inflows to the country increased substantially in recent weeks, says the Central Bank.
Explaining the sources of foreign currency inflows the Central Bank said, first, there were significant inflows to the Colombo Stock Exchange (CSE), with the net inflows to the CSE so far in 2012 amounting to USD 164 mn. Second, there were inflows in respect of investments in several commercial banks, amounting to about USD 127 mn during this week. Third, investments in Sri Lanka Development Bonds (SLDBs) were made to the value of USD 87 mn, comfortably exceeding the USD 45 mn that was maturing and was on offer for re-investment. Fourth, net investments of USD 385 mn in Treasury Bills and Bonds were made by foreign investors so far in 2012.
A significant part of above inflows was absorbed by the Central Bank, thereby adding to the gross official reserves of the country.
Further foreign currency inflows are expected in the next few weeks, which would include inflows as a result of several commercial banks raising funds abroad for their Tier 2 capital, and an initial investment of approximately USD 73 mn in a mega hotel project, the Bank said.
The Central Bank also said that in response to the recent policy measures implemented by the Bank and the government, there are clear signs of deceleration in private sector credit growth and import demand.
A further moderation is expected once the New Year seasonal demand for imports is over, thereby substantially easing the deficit in the trade account.
The increasing foreign currency inflows and the easing of the import demand as stated above are expected to stabilize the foreign exchange markets in the coming weeks, the Bank further said.