The International Monetary Fund on Tuesday warned Sri Lanka against building foreign currency reserves by borrowing from foreign investors. Sri Lanka's central bank announced this month that foreign reserves hit a historic high of USD four billion,sufficient to cover over four months of imports. "We don't want Sri Lanka to borrow its way to build reserves," head of the IMF mission to Sri Lanka,Brian Aitken told reporters here after a two-week review of the island's economy. The bank said reserves were boosted by foreign investors buying rupee-denominated treasury bills and bonds and the government selling dollar bonds. "The central bank has been building a war chest of reserves lately through debt. We would prefer if Sri Lanka built up reserves from exports and from remittances and not by borrowings," Aitken said. Central bank governor Nivard Cabraal said the bank raised more than USD 1.2 billion in cash by selling government debt to foreigners. Sri Lanka's reserves fell to cover just over one month's imports earlier this year as security forces pushed their final offensive against separatist Tamil Tiger rebels.
