The Monetary Board of the Central Bank of Sri Lanka imposed a 100 per cent margin deposit requirement against Letters of Credit opened with the commercial banks for the import of motor vehicles,which are generally used for non-commercial purposes,with immediateeffect.Accordingly, Letters of Credit for the importation of these vehicle categories could be done only with a minimum cash margin of 100 per cent.

The decision to impose the margin deposit requirement is based on recent developments which, if not addressed, could threaten macroeconomic stability. These include the following:

Several international media sites have recently quoted an analysis by Nomura Holdings Inc., which shows that seven emerging economies including Sri Lanka are at risk of an exchange rate crisis.

The said media sites further quoted the report as saying Sri Lanka’s short term external debt is as high as US dollars 160 billion. As Sri Lanka’s short term external debt is nowhere near this figure, the Central Bank of Sri Lanka requested Nomura to correct the errors in their computations.1

In response, according to Bloomberg, Nomura has “corrected their ‘Damocles’ report to fix Sri Lanka’s short term debt figure to be US dollars 7.5 billion” in an emailed statement to media. Nomura has, however, kept the ‘Damocles score’ for Sri Lanka unchanged.