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Sri Lanka's rupee is anticipated to maintain stability in the foreseeable future, according to Central Bank Governor Nandalal Weerasinghe, who highlighted that current data suggests minimal volatility. With a substantial reserve of 5.4 billion US dollars available for intervention, the central bank is prepared to manage any fluctuations effectively. Governor Weerasinghe emphasized the central bank's commitment to market-driven exchange rates, while retaining the capability to intervene if volatility exceeds acceptable levels. Moreover, Sri Lanka's debt restructuring efforts are expected to conclude, paving the way for new aid and facilitating smoother debt servicing with grace periods and lower coupons.
Last year, Sri Lanka successfully repaid 2.5 billion US dollars of debt, including obligations to multilateral lenders. Notably, the rupee has appreciated from 370 to around 300 against the US dollar since March 2022, following the abolition of a surrender rule mandating banks to sell dollars to the central bank for new currency issuance. Furthermore, the central bank's strategic selling of Treasury bills against the injected rupees from dollar purchases has contributed to a balance of payments surplus. This surplus has been supported by subdued private credit, state enterprise profits, and improved budget deficits, consolidating Sri Lanka's economic resilience amidst evolving global dynamics.
