People's Bank of China (PBoC) has indicated that it will consider renewing its swap arrangement with the CBSL in 2024 for another three years if there is no significant situation change, the IMF Staff Report highlighted.
However, the PBOC swap ($1.4bn in 2022) will become usable once Gross international reserves (GIR) rise above 3 months of the previous year's import cover.
The GIR stood at about $1.9 billion (about 1 month of prospective imports) at end-December 2022, including currently unusable $1.4 billion worth of yuan deposits at the PBOC.
GIR, historically supported by extensive external government borrowing, declined from 62 percent of the Fund’s Assessing Reserve Adequacy (ARA) metric at end-2019 to 25 percent at end-2021 and 16 percent at end-December 2022, much below the recommended adequacy range of 100-150 percent.
Excluding the temporarily unusable assets related to the PBOC swap, usable GIR in 2022 are estimated at 4 percent of the ARA metric, the report further showed.