The country’s gross official reserves have exceeded US$ 3 billion after more than US$ 1 billion flowed in during the week from an international hedge fund in the US interested in investing in government Treasury bonds.

Superintendent of the Public Debt Department C. P. J. Siriwardena said the commitment to invest in government Treasury bonds amounted to about US$ 1.2 billion.

Of this, by last Wednesday, over US$ 875 million had come into the country through HSBC and the Central Bank purchased these dollars: US$ 270 million on Monday, US$ 305 million on Tuesday and US$ 308 on Wednesday. (See yesterday’s Island Financial Review).

Siriwardena speaking to the Island Financial Review said according to the commitment received (after a recent road-show undertaken by the Central Bank to promote government securities in the US, Europe and East Asia) a total of US$ 1.2 billion is most likely to flow in by today (Friday).

This inflow is coming from a single US-based hedge fund. Siriwardena said there could be more to come as other investors have also shown interest in investing in government securities.

The Central Bank has been purchasing these dollar inflows over the past few days and the Acting Additional Director of the Central Bank’s Economic Research Department, K. D. Ranasinghe, said the transactions would take time to be finalised.

"By Monday we should know exactly how much has come in but there is an indication that the total inflow over the week could exceed US$ 1 billion," he told the Island Financial Review.

Ranasinghe said the funds would not go to the government but the Central Bank would use it to retire some of its Treasury bill holdings.

Meanwhile, dealers said these inflows had no impact on the domestic rupee market. The exchange rate also remained stable.

"The Central Bank is building its reserve fast and is way ahead of the IMF target. Until sufficient reserves are built up (to finance 3.5 months imports by the end of the IMF programme period= IMF target) the Central Bank can intervene in the market to stabilize the rupee and build reserves," a dealer said.

"But after that, we will have to see what becomes of the exchange rate," he said.

Sri Lanka’s gross official reserves amounted to US$ 2.3 billion by mid-August. The US$ 1.2 billion inflows would take reserves well above US$ 3 billion.