He noted that Sri Lanka’s twin deficit condition, high budget and external current account deficits has been well known over the years. Domestic and foreign borrowing has therefore naturally resulted in rising debt levels.External borrowing contributes to widen the deficit in the external current account further. In addition, the increased foreign debt service payments drain the country’s international reserves, which serve as a buffer for external shocks. Therefore, while fiscal consolidation efforts continue, it is important to maintain the current account deficit in the balance of payments at sustainable levels by strengthening the tradable sector.
He further saidthat foreign reserve management activities will continue to be based on a model based Strategic Asset Allocation (SAA) framework. Further initiatives are planned in this subject area. The Central Bank is also in the process of introducing a mid-day benchmark reference rate in line with International Organisation of Securities Commission’s (IOSCO) principles for the benefit of stakeholders, including the general public and foreign investors.In addition, to ensure a high standard of conduct in dealing with the global forex market, the implementation of global FX code is also in the agenda of policies to be adopted in