Sri Lanka on verge of bankruptcy, launches gold sales

Colombo: Sri Lanka has started selling gold to protect itself from bankruptcy. Sri Lanka is trying to support its declining economy by selling gold. Sri Lanka's central bank has said it has sold a portion of its gold reserves in view of depleting foreign exchange reserves.

Sri Lanka's central bank governor Niward Cabral has said that Sri Lanka sold a portion of its gold reserve in December 2020 to increase liquid foreign assets (cash). He said the gold reserve was raised later in the year after a currency swap from China (trading in each other's currency instead of the dollar). According to a report, Sri Lanka's central bank is estimated to have sold about 3.6 tonnes of gold out of 6.69 tonnes of gold reserves in early 2021, leaving it with about 3.0 to 3.1 tonnes of gold.

Earlier in 2020 also, the central bank had sold gold. At the beginning of 2020, there was a gold reserve of 19.6 tonnes, of which 12.3 tonnes of gold was sold. Governor Cabral said gold sales were made to strengthen foreign exchange reserves. He said, 'When foreign reserves decrease, we reduce gold holdings. We bought gold when foreign reserves were rising. Once the reserve level rises to more than USD 5 billion, the central bank will consider increasing gold holdings.'

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