Sri Lanka's foreign reserves have gained above average returns over the past 10 years despite the challenges in global monetary conditions, the Central Bank said.
The Central Bank in a statement said yesterday that the Bank has been able to deliver higher than average returns and consistent enhancement of value of its reserves in the past.
"The investments in Greek Bonds were a small fraction of the Central Bank total Europe portfolio and the loss of the Greek bonds was comfortably offset by higher returns from other investments," the statement said.
The Bank, clarifying its actual position on reserve management, said it manages the foreign reserves in order to safeguard and enhance the value of its overall reserves as well as generate a reasonable income from its investments.
According to the Central Bank, the returns generated by the reserve management activities in the past 2 years had been well above the bench mark of the US Fed Fund rate and had yielded US$430 million in 2011 at a 6.56% rate on an investment of US$ 6.557 billion. In 2010, the return was US$341 million on US$ 5.537 billion at a rate of 6.16%.
The yield in 2011 has been after making provision for losses in Greek Bonds, the Bank said adding that it clearly indicates the Bank's sound management policies in a volatile global economic environment.
"It may also be pertinent to state that the profits made by the Central Bank from its investment of foreign reserves for the period 2006 to 2011 were US$1,243 million, which amount is substantially higher than the profits made during the previous ten years," the statement pointed out.
Noting that a wide portfolio, which includes all types of financial instruments such as fixed income, money market and treasuries, will incur fluctuations in real-time the Central Bank said despite significant challenges it has managed to deliver above average returns and value growth of its reserves in the past and it is confident that it can do so in the future as well, in keeping with its policy guidelines.
"In that context, the alarmist, and one sided reports which were obviously designed to discredit the Central Bank and generate feelings of uncertainty within the economy are highly regrettable," it noted.