Central Bank to raise Rs 2.5 bn from bond issue : Foreign reserves to reach US$ 7.5 bn by year end

The Central Bank has sought Cabinet approval to raise US$ 2.5 billion 2017 from a sovereign bond issue of US$ 1 billion and a syndicated loan of US$1.5 billion, Central Bank Governor Dr. Indrajit Coomaraswamy said yesterday.

With these fund inflows the country could expect its foreign reserves to reach US$ 7.5 billion by the end of this year, he said in Colombo yesterday.

The governor said the economy was responding to the stabilization measures adopted by the Central Bank and the government. However monitoring the macro economic developments was necessary in the period ahead before adopting further corrective measures, he said.

Coomaraswamy said the credit lending of the two state banks which stood at 30 percent plus and other banks 20 percent was alarming and was greater than they liked because it may undermine monetary policy transmissions. In 2016, the Bank of Ceylon and People’s Bank had credit growth of 30 to 32 percent while private banks have reduced the rate below 20 percent.

He said the Central Bank will look into where the growth was coming from and the credit at state banks may be growing partly due to funding local contractors who were building roads. The governor said however that they did not intend to influence individual commercial decisions of banks.

Coomaraswamy said taking Lanka’s debt management out of the Central Bank was a decision in the correct direction because only a very few countries keep debt management under the purview of the Central Bank.

The Central Bank Monitory policy outlined that in January 2017 tourism earnings had increased by 12.9% to US$ 363.6 million. Workers’ remittances in December 2016 increased by 10.7% to US$ 684.6 million and for the period of January to December 2016 worker remittances had increased by 3.7% to US$ 7.2 billion The Sri Lanka rupee which depreciated by 3.8 % against the US Dollar in 2016 also had recorded a depreciation 0.6% this year up to February 7. The country’s Gross official reserves stood at US$5.5 billion in January 2017.