In a remarkable turn of events, Sri Lanka has surpassed expectations by boosting its official reserves by a substantial $829 million in December alone. As a result, the nation concludes the year 2023 with a noteworthy official reserve balance of $4,400 million, coming remarkably close to the International Monetary Fund’s (IMF) target of $4,431 million outlined in the macroeconomic program.
The IMF had initially projected that the country’s official reserves would reach around $3,806 million by the year-end. However, a significant influx of funds, totalling $787 million, from international institutions during the week of December 14-20 propelled Sri Lanka towards its ambitious reserve target.
The achievement is particularly noteworthy as the central bank, in its pursuit of bolstering reserves, actively purchased more dollars from the market. The surplus exceeded the aforementioned international funds injection, suggesting additional positive factors contributing to the increased reserves.
One key factor identified for this surge is the substantial rise in labour remittances and earnings from the tourism industry in December. The increased flow of foreign currency into the country appears to have significantly contributed to the surge in reserves, despite the central bank’s proactive dollar purchases.
Notably, the increase in reserves has had a notable impact on the exchange rate, with the price of a dollar showing signs of decline. This development suggests a favourable economic outlook for Sri Lanka, as the nation is poised to record a clear surplus in the current account by the close of the year. The achievement is being hailed as a record situation, marking a positive milestone in the country’s economic landscape.
As Sri Lanka concludes 2023 on a high note, the unexpected boost in official reserves showcases the nation’s resilience and ability to surpass financial targets, positioning it favourably on the global economic stage.