The country’s foreign reserves will rise to about USD 9 billion by the end of this year, an amount that could comfortably cover the county’s import bill for five months, Central Bank Governor Dr.Indrajith Coomaraswamy said. Speaking to the media at the Central Bank auditorium, the Governor said the country’s foreign reserves stood at USD 8.4 billion by the end of July.
He said another USD 1.5 billion will come in the remaining months of this year from a syndicated loan from the China Development Bank, IMF next tranche and “panda bonds issuance”. “USD 1 billion will come this year from a syndicated loan from China Development Bank (at 5.35percent interest rate). Its first tranche of USD 500 million will be in the middle of August and the other tranche of USD 500 million will be in October. If everything goes well, there should be one more IMF tranche of USD 250 million within this year,” he said.
The Governor said the Central Bank has also decided to explore “panda bonds market” to improve its foreign reserves. “We are working towards panda bonds issuance before the end of the year. We went on a non-deal road show to China and met representatives of some banks, insurance companies, other institutional investors and most importantly the People’s Bank of China.
The Deputy Governor of People’s Bank of China came up with a totally unsolicited suggestion that we set up a joint task force to examine how Sri Lanka could explore panda bonds market. We target about USD 250 million from panda bonds issuance,” he commented. Responding to journalists questions as to why China is turning up to be so benevolent towards Sri Lanka, Dr. Coomaraswamy said, “During the consultations, it was clear that they see us as a key strategic partner given our location.
In addition, Sino-Sri Lanka relations have been excellent right through from the Rubber-Rice Pact in 1952. China has always been supportive of Sri Lanka.” The Central Bank Governor at the outset of the press conference made it clear that it was unlikely that the economic growth will exceed 4 percent this year, well below the potential rate of growth initially set as 5.7 percent.
“If one is realistic it is unlikely that economic growth is going to be more than 4 percent this year. The first half is likely to grow at about 3.4 percent and to achieve a 4 percent growth, you will have to have an average 4.6 percent growth in the second half. I do not predict anything beyond that. Last year, we were surprised with the downside of growth and hopefully this time we will be surprised with upside,” he told the media.
The Governor with his higher ranking Central Bank officials called the press conference to announce the Monetary Board decision made on Thursday to maintain policy interest rates at their current levels.Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 7.25 per cent and 8.50 per cent, respectively.