COLOMBO: Sri Lanka's central bank has absorbed more than $400 million so far in 2014 to prevent a sharp gain in the rupee, a top central bank official said on Wednesday, amid steady inflows in the absence of strong importer dollar demand and lower credit growth.
"We have been buying dollars and we have bought a little over $400 million so far this year," Ananda Silva, one of the two deputy governors at the central bank, told Reuters. "The entire amount we bought last year was around $400 million."
Currency dealers have said the currency is under upward pressure due to steady inflows from worker remittances and exporter conversions of the U.S. currency. They expect the rupee to face upward pressure until credit growth and imports pick up.
Private sector credit grew 4.3 percent year-on-year in March, according to the latest central bank data, its slowest expansion since May 2010. That compared with growth of 4.4 percent in February and 10.9 percent a year ago.
Private sector credit growth has been on a declining trend since March 2012 when it hit a record high of 35.2 percent before the central bank took several monetary policy measures to curb excess credit growth.
Some banks and currency dealers say that despite multi-year low policy rates, they do not see much demand for imports and borrowing for investments, as consumer spending is declining due to higher taxes and lower disposable income.
On Friday, central bank Governor Ajith Nivard Cabraal told Reuters that the currency was performing as the bank expected, and there was no pressure to appreciate or depreciate.
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