Expansion in net foreign assets
There is an expansion in net foreign assets of the Central Bank. The
balance of payments (BOP), which constitutes the Net Foreign Assets (NFA)
component in reserve money is projected to record a surplus of US$700mn
in 2010, Central Bank Governor Ajith Nivard Cabraal said at the Central
Bank, Conference Hall recently.
Making a presentation on Monetary and Financial Sector Policies for
2010, he said this surplus is due to several reasons.
The higher performance in the service account with an increase in
inflows on account of transportation, travel and IT related services,
and the expected recovery in the tourism sector, the higher remittances
due to the end to the internal conflict and widened banking facilities
mainly in liberated areas, and the higher capital inflows in terms of
foreign direct investment, loan capital to the private sector, and
portfolio investments with the expected global economic recovery are the
main reasons for this surplus.
The increased foreign loan and grant disbursements to the Government
with the effective and early implementation of projects also helped the
Governor said. Cabraal said the main source of expansion in broad money
is the combined outcome of an increase in both the NFA and the NDA of
the banking system, which includes both the Central Bank and the
The NFA is expected to increase due to the surplus in the balance of
payments and the NDA including net credit to the Government, credit to
public corporations and credit to the private sector, is expected to
increase in 2010.
Referring to the contraction in net domestic assets of the Central
Bank he said that although the provisional advances to the Government by
the Central Bank may increase by Rs 12 bn, a significant increase in
holdings of Treasury Bills is not expected in 2010.