Sri Lanka forex reserves improving, but global oil prices keep increasing

The gross official reserves were provisionally estimated at US dollars 4,951 mn as at end March 2024 including proceeds from the People’ Bank of China (PBOC) swap arrangement, which is subject to conditionalities on usability, according to the Weekly Economic Indicators of the Central Bank of Sri Lanka.

The report, however, stated that during the period under review (March 29- April 5), crude oil prices exhibited an increasing trend. Crude oil prices increased owing to optimism on demand with the expansion in manufacturing activity in China and the US, coupled with the concerns about tight supply stemming from escalating geopolitical tensions and major producers keeping output cuts in place. Overall, both Brent and WTI prices increased by more than US dollars 3.00 per barrel during the review period.

The situation, therefore, appears to remain ambivalent for Sri Lanka as the cost of incoming shipments of oil could jump in the coming weeks.

Further according to the report:

“During the year up to 05th April 2024, Sri Lanka rupee appreciated against the US dollar by 8.0 per cent. Given the cross currency exchange rate movements; the Sri Lanka rupee appreciated against the Japanese yen by 15.5 per cent, the pound sterling by 9.0 per cent, the Euro by 10.5 per cent and the Indian rupee by 8.5 per cent during this period.”

“Weekly Average Weighted Prime Lending Rate (AWPR) for the week ending 05th April 2024 decreased by 13 bps to 10.56 per cent compared to the previous week.”

“The reserve money decreased compared to the previous week mainly due to decrease in the deposits held by the commercial banks with the Central Bank. The total outstanding market liquidity was a surplus of Rs. 19.205 bn by 05th April 2024, compared to a surplus of Rs. 5.283 bn by the end of last week.”