August 28, 2009 / 12:04 PM / 10 years ago

UPDATE 1-Sri Lanka says forex reserves hit record $3.9 bln

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COLOMBO, Aug 28 (Reuters) - Sri Lanka’s central bank on Friday said its foreign exchange reserves hit a record $3.9 billion after it received its share of a $250 billion International Monetary Fund allocation.

That is enough to fund more than 4 months of imports, and surpassed the previous record of $3.56 billion.

The IMF on Aug. 13 approved a plan to boost member countries’ reserves by $250 billion through a one-time allocation of special drawing rights, or SDRs.

SDRs are the IMF’s internal accounting unit, based on a basket of currencies, which can be exchanged for hard money.

Sri Lanka’s share, which is separate from a $2.6 billion IMF loan approved in July, amounted to $475 million. “With the renewed investor confidence and the continuation of a steady increase in foreign exchange inflows, the country’s external reserves position is expected to strengthen further in the coming months,” the central bank said in a statement.

The central bank did not give a new forecast, but Central Bank Governor Ajith Nivard Cabraal has forecast reserves of $5-6 billion over the next 20 months. [ID:nCOL488027]

A single U.S. fund last week bought up $875 million in government securities, boosting reserves by a third.

The country had record high reserves of $3.56 billion by August 2008, pushed up by foreign purchases of government securities that were yielding over 17 percent.

But by year’s end, they had plummeted by half with the central bank defending the rupee against depreciation and the withdrawal of more than $600 million after investors cashed in government securities as global financial markets crashed.

Those factors prompted Sri Lanka to reverse political course and pursue IMF assistance. (Reporting by Ranga Sirilal; Editing by Bryson Hull)

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