Explain how Sri Lanka's foreign exchange reserves doubled in just one month, Opposition to government

The Sri Lankan government must explain how the country’s foreign exchange reserves surged past USD 3 billion from the USD 1.58 billion mark in just one month, the main opposition party Samagi Jana Balavegaya (SJB) demanded on Thursday.

On Wednesday, the Central Bank of Sri Lanka announced that the country's foreign exchange reserves had touched USD 3.1 billion.

“In keeping with our previous announcements, the official #reserve position of the @CBSL has today reached approx. USD 3.1 billion and will remain around that level by the end of 2021 as well,” Governor Nivard Cabraal said in a tweet.

This was in sharp contrast to last month, when the official foreign reserves had plummeted to USD 1.58 billion.

“These facts cannot be hidden. Tell us the source where they came from”, SJB legislator Harsha de Silva said while addressing the press.

According to sources, the forex reserve boost was buoyed by a 10 billion yuan (USD 1.6 billion) currency swap agreement signed with China on March 21 this year. However, de Silva said that reports have surfaced that Sri Lanka can use this USD 1.6 billion only to import products from China.

He argued that if the reserves had swelled as claimed by the Central Bank, then US dollars must be released to pay around 1,500 containers carrying essential items currently stranded at the Colombo port.

Importers said that these containers were being held up due to the ongoing foreign exchange crisis in Sri Lanka brought about due to the shortage of US dollars.

The Central Bank of Sri Lanka’s announcement comes days after Fitch had downgraded Sri Lanka’s sovereign rating to ‘CC’ from ‘CCC’, saying there is an increased probability of a default in coming months in light of the country’s worsening external liquidity position underscored by a drop in foreign-exchange reserves.

The New-York based rating agency said it will be difficult for the government to meet its external debt obligations in 2022 and 2023 in the absence of new external financing sources. “Obligations include two international sovereign bonds of USD 500 million due in January 2022 and USD 1 billion due in July 2022,” it said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)