SL reserves in line with IMF metrics
View(s):According to new IMF measurements, Sri Lanka has held adequate levels of foreign exchange reserves throughout the recent past, the Central Bank says.
Even though actual reserves of the country were low throughout in comparison to the conventional measure of 100 per cent of short-term external debt (STD), in terms of the new IMF’s risk-weighted metrics, the actual reserves in Sri Lanka have been in excess of the 100 per cent benchmark, except for the two exceptional years, 2008 and 2011, the CB said in a report.
The IMF recently recommended a more broad-based risk-weighted metric approach to assess reserve adequacy of countries, taking into account the drains of foreign exchange during crisis episodes emanating from external shocks.
Even though there is no single commonly accepted standard benchmark for estimating adequacy of reserves, countries broadly adopt three major conventional measures, namely, reserves to imports, reserves to STD and reserves to monetary aggregates (for example M2), with international benchmarks under these three measures being 3 months of imports, 100 per cent coverage of STD and 20 per cent of M2, respectively, the CB said.
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