Significant improvement in balance of payments situation
The overall Capital and Financial Account of the Balance of Payments
(BOP) situation saw a significant improvement in the first quarter of
2012, with the deficit narrowing down to US dollars 251 million compared
to a deficit of US dollars 1,695 million in the last quarter of 2011,
stated the Central Bank.
The lower trade deficit, the improved surplus in the services and
current transfers and the lower deficit in income account, helped narrow
the current account deficit, the Bank said.
In relation to the BOP, there has been a substantial inflow of
foreign exchange, reflecting enhanced global investor confidence in Sri
Lanka as an emerging market.
Foreign Direct Investments (FDI) recorded an inflow of US dollars 220
million during the first quarter of 2012, compared to US dollars 197
million over the same period last year, the Bank added..
Further, FDI inflows amounted to US dollars 308 million by the first
week of May 2012.Portfolio investments, including investments in the
Colombo Stock Exchange (CSE), also increased significantly to US dollars
159 million, on a net basis.
In addition, foreign borrowings by commercial banks increased, led by
the recent international bond issue of US dollars 500 million by the
Bank of Ceylon (BOC), which recorded an over subscription of 7.7 times
and a total order value of US dollars 3.86 billion in May 2012.
With respect to inflows to other commercial banks, long-term
borrowings amounted to US dollars 353 million, and short-term borrowings
amounted to US dollars 414 million, by the second week of May 2012. A
significant increase has also been shown in foreign investments in
Government securities, with net inflows to treasury bills and bonds
increasing to US dollars 406 million in the first quarter of 2012, from
US dollars 79million during the first quarter of 2011. This can be
mainly attributed to the increase in threshold for foreign investments
in December 2011.(Courtesy priu.gov.lk)