Sri Lanka’s import cover too low?

CHRONICLE wrote:

Sri Lanka Gross Official Reserve Cover for months of imports stood at 3.1 months as at April 2021. Is this too low? The media has portrayed the decline in reserves and import cover as a liquidity crisis, creating a negative image that can be very harmful to business sentiment and the economy.

The months of import cover indicates the number of months of imports that can be covered by the reserves held at the central bank. However, the central bank reserves are not directly used for the finance of imports. It is merely an indicator showing the reserves relative to imports, for the ease of comparison between countries.

When we compare Sri Lanka's import cover with developed countries such as the United Kingdom, Netherlands, Germany and Australia we observe that the island has a higher import cover. These developed countries have continued to have lower import cover than Sri Lanka for the past 10 years. It is important to understand the indicator and view it in a global context prior to making a judgment of whether it is negative or not.

#lka #reserves #srilanka #importcover #economy #srilankaeconomy #centralbank #liquidity #SLEconomy

CHRONICLE wrote:

Sri Lanka Gross Official Reserve Cover for months of imports stood at 3.1 months as at April 2021. Is this too low? The media has portrayed the decline in reserves and import cover as a liquidity crisis, creating a negative image that can be very harmful to business sentiment and the economy.

The months of import cover indicates the number of months of imports that can be covered by the reserves held at the central bank. However, the central bank reserves are not directly used for the finance of imports. It is merely an indicator showing the reserves relative to imports, for the ease of comparison between countries.

When we compare Sri Lanka's import cover with developed countries such as the United Kingdom, Netherlands, Germany and Australia we observe that the island has a higher import cover. These developed countries have continued to have lower import cover than Sri Lanka for the past 10 years. It is important to understand the indicator and view it in a global context prior to making a judgment of whether it is negative or not.

#lka #reserves #srilanka #importcover #economy #srilankaeconomy #centralbank #liquidity #SLEconomy

SAGA wrote:one of my good friend is in Central Bank at top level and he too doesnt agree with that we are facing foreign reserve threat.what he says is that the government is trying to promote local industries and people creating stories on Foreign reserves are base less..I dont know up to what level that is true.personnely believe that we were at its worst when we had war with LTTE.Its strange that we face the same after post war.

SAGA wrote:one of my good friend is in Central Bank at top level and he too doesnt agree with that we are facing foreign reserve threat.what he says is that the government is trying to promote local industries and people creating stories on Foreign reserves are base less..I dont know up to what level that is true.personnely believe that we were at its worst when we had war with LTTE.Its strange that we face the same after post war.

SAGA wrote:The main thing is  that any government cant ban imports from another  country due to trade deals. For an example we cannt ban vehicle imports from Japan since the trade agreements and if such thing happens it will affect us since Japan will take counter measures in turn(they might ban our exports).Same thing with India,UK,US and China etc  also..Thats the simple truth.So we need to find more strong , more viable case for such restrictions..I think foreign reserve decrease would be a reasonable logic.

if the government really need to boost local industry ,this would be  an ideal time since this foreign reserve decrease has become a "Talk of the town" and people accepted it as the cause for ban of imports whether its  true or not.

We increased the local diary production due to contamination of milk powder  in the past  likewise this would be ideal time for increase the domestic production if they genuinely intend it.

dayandacool wrote:

SAGA wrote:one of my good friend is in Central Bank at top level and he too doesnt agree with that we are facing foreign reserve threat.what he says is that the government is trying to promote local industries and people creating stories on Foreign reserves are base less..I dont know up to what level that is true.personnely believe that we were at its worst when we had war with LTTE.Its strange that we face the same after post war.

Your statement is optimistic. I can agree with you if we manufacture mobile phones and TVs in SL, if they are to promote local production. Do you really think the government Ban of chemical fertilizer is due to the fact that they care more about people's health or is it just for the mere fact that they do not have reserves to purchase fertilizer? Given the haphazard manner in which the Ban came in to force overnight, I would say it's definitely the latter. If they care for health of the citizens, they wouldn't open up Mendis distilleries just to collect the excise. So much for caring of health.

It is true that the government revenues have reduced due to pandemic. We all agree to that. Government doesn't need to hide behind lies. Accept it and tell people the truth for what they will support the government for another 3 years. If they keep on lying, they are dragging the country down with them. I wouldn't be surprised even if they opted for a IMF bailout despite repeating that they won't seek such assistance because government has never done what they say and never say what they done. Ego is a bad thing.