The outstanding foreign currency borrowings of Sri Lanka’s banking sector rose for the first time in a year in the second quarter(2Q2021) in the line with the Central Bank of Sri Lanka (CBSL) lifting borrowing restrictions in foreign currencies as the country embraced a foreign exchange liquidity crisis.
The foreign currency borrowings of the banking sector stood at Rs.893.76 billion in the quarter, up from Rs.881.48 billion in the previous quarter.
The CBSL lifted short-term foreign currency borrowing restrictions imposed on banks in May.
Meanwhile, the outstanding foreign currency deposits also continue to increase in the quarter surpassing Rs. 2.1 trillion, up from Rs.1.97 trillion in the previous quarter and Rs. 1.6 trillion one year back. This was partly driven by Special Deposit Account (SDA) scheme introduced by the CBSL, which offers an additional Interest.
The CBSL last month sold foreign exchange to the market using a part of the inflows on account of IMF’s nearly $800 million SDR allocation to smooth out essential foreign exchange transactions such as financing of essential imports as the foreign exchange liquidity crisis continues to worsen.