Dec 30, Colombo: Sri Lankan government in the year has settled several foreign commercial loan obligations amounting to US $ 175 million reducing its exposure to foreign exchange risk, the Central Bank said today.

In a statement released today the Bank disputing the claims that the government’s external commercial borrowings have been rising said the external commercial net debt liabilities stock has declined by about US $ 255 million during the year 2008 thereby substantially reducing the government’s exposure to foreign exchange risk.

The government limited its commercial borrowings to US $150 million in foreign currency in 2008 reducing the total external foreign currency commercial debt stock from US $ 485 million at end 2007 to US $ 460 million at end 2008.

According to the Bank foreign investments in rupee denominated Treasury bonds and Treasury bills valued at Rs 50 billion (US $ 443 million) at the end of 2007 increased to Rs 70 billion (US$ 620 million) by early September 2008. But with the global market melt down, the stock fell to a value of Rs 24 billion (US$ 213 million) by the end of 2008 as foreign investments of Rs 46 billion (US $ 407 million) were withdrawn within the last three months.

The Central Bank report comes weeks after the Standard & Poor's Ratings downgraded Sri Lanka's sovereign rating from ‘B+’ to ‘B’ citing declining foreign currency reserves and the high fiscal deficit.

The Bank criticized the S&P move as factually incorrect, logically untenable and grossly misleading.