Central Bank reduces US dollar purchases

In a testament to robust foreign currency availability, Sri Lanka's Central Bank scaled back its purchase of US dollars from the domestic banking sector in May, acquiring $224.5 million compared to $419.5 million in April.

Offsetting some of these purchases, the Central Bank sold $32.0 million back into the market, resulting in a net purchase of $192.5 million for May. This decline reflects natural fluctuations in market dynamics rather than a cause for concern.

Despite the reduced purchases, the rupee experienced slight depreciation pressure in May, largely attributed to seasonal fluctuations affecting tourism earnings. However, the country's export revenues and remittances remained strong.

From January to May, the Central Bank maintained a consistent pattern of net dollar absorption, totaling an impressive $1,812.4 million year-to-date. This equates to an average monthly absorption of $363 million, contributing to the rebuilding of Sri Lanka's gross official reserves.

As of the end of May, these reserves stood at $5,421 million, marking the highest level since December 2020, when the country was actively managing its debt obligations.