Sri Lankan central bank rejects currency crisis report

ECONOMYNEXT – Sri Lanka’s central bank Monday rejected a report that the island was at risk of a currency crisis, saying it had asked Nomura Holdings Inc., which made the analysis, to change its opinion.

The analysis by Nomura, which was published by international media, said seven emerging economies are at risk of an exchange rate crisis.

It described Sri Lanka as having the worst outlook “due to still-weak fiscal finances and a very fragile external position”.

 Nomura analysts were quoted as saying about Sri Lanka: With [foreign exchange] reserves of less than five months of import cover and high short-term external debt ($160bn), its refinancing needs are large. Political stability also remains an issue.”

Sri Lanka’s central bank said in a statement that Nomura’s assessment of external debt was wrong.

“Given the fact that Sri Lanka’s short term external debt is nowhere near the US$ 160 billion figure that Nomura analysts have quoted, it appears that Nomura Holdings have made a serious computational error with regard to Sri Lanka’s external vulnerability,” it said.

“As such an erroneous report could to trigger an unwarranted panic amongst investors, particularly in the context of current volatile global market conditions, the Central Bank of Sri Lanka has already written to Nomura Holdings, and requested them to correct this error without any delay.”
(COLOMBO, 10 September, 2018)