ECONOMYNEXT – Sri Lanka must reveal the source of recent inflows that helped boost its depleting foreign exchange reserves to 3.1 billion US dollars, failing which the announcement may prove to be a “major deception”, the main opposition Samagi Jana Balavegaya (SJB) said.
Speaking to reporters on Wednesday (29), hours after Central Bank Governor Ajith Nivard Cabraal had tweeted the news, SJB MP Dr Harsha de Silva suggested that the forex reserve boost was helped by a 10 billion yuan currency swap agreement signed with China on March 21 and valid for three years.
“That was for 10 billion yuan, or about a 1.6 billion US dollar equivalent. That 1.6 billion together with [the 1.58 billion reserves remaining until Cabraal’s announcement] would add up to 3.1 billion.
“From what we have heard, this 10 billion yuan can be used to purchase goods imported from China,” said de Silva.
Until Wednesday morning’s announcement, official foreign reserves had dropped to 1,587 million US dollars in November, amid continued liquidity injections mainly made to sterilize interventions.
Related: Sri Lanka foreign reserves reach US$3.1bn by Dec 29: CB Governor
MP de Silva said that, in the event of a clause in the swap agreement that the money cannot be used however Sri Lanka wishes to use it, then whether or not it can really be considered foreign reserves may become debatable.
“Did this come from Dubai, China or was the March 21 swap cashed? Tell us so we know,” he said.
The swap agreement would promote “bilateral trade and direct investment for economic development of the two countries, and to be used for other purposes agreed upon by both parties,” the central bank said in a statement in March.
Related: Sri Lanka and China ink 10bn yuan central bank swap for 3-years
The SJB parliamentarian said that as part of the swap agreement, Sri Lanka gives China 300 billion rupees in exchange for the 10 billion yuan.
“With that 300 billion rupees, these people can invest in Sri Lankan treasury bills if they so desire, as they have rupees. Let’s say the interest is 2 percent. On treasury bills, you can get 8 percent. They’ll have a profit of over 10 percent because of this,” he said.
“This is a short term exchange. We need dollars in the market for cooking gas and medicine and everything by tomorrow morning.
“If there are no dollars, this is some major deception,” he added. (Colombo/Dec29/2021)
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