Financial Times

Central Bank purchased $652 million this year to prop forex reserves


The Central Bank (CB) said this week it had been able to substantially build foreign reserves in the country and that this year upto July 10 it had purchased $652 million from the domestic foreign exchange market.

In a statement, it said this was because pressure on the exchange rate was easing. “The decline in expenditure on imports has outpaced the drop in earnings from exports, and has led to a substantial drop in the trade deficit during the first five months of the year.

This, coupled with the steady inflow of remittances, which has been well in excess of the trade deficit for this period, impacted positively on liquidity in the domestic foreign exchange market,” the CB said in its monthly monetary policy review.

It said inflation which has declined on a year-on-year basis to 0.9% in June is expected to gradually pick up from this month, particularly following the recent revision to fuel prices and its impact on domestic prices, inflation. However year-on-year inflation is expected to remain at single digit levels throughout this year.

It said given the positive developments in the country, particularly since mid-May, economic activity is expected to pick up during the second half of the year. In this regard, the lower interest rate regime would enable a rebounding of private sector activity, underpinning the recovery in the economy.

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