Central Bank takes steps to stem undue depreciation of Rupee

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The Central Bank of Sri Lanka says it is of the view that the recent increase in volatility of the exchange rate is unwarranted and unacceptable.

Accordingly, among other measures, the Central Bank will take appropriate action aggressively hereafter to contain this volatility in the domestic foreign exchange market, it said in a statement.

The Central Bank expects that these actions, together with the continuation of the curtailment of non-essential imports, will enable the Rupee to appreciate within the next few days towards the levels of below Rs. 185 per US dollar observed in November 2020.

The Central Bank reiterates that official reserves remain at sufficient levels. At present, gross official reserves are at US dollars 5.6 billion. Discussions with the Central Bank’s domestic and foreign counterparts to boost the level of reserves are also reaching an advanced stage of conclusion.

The receipt of these expected inflows as well as the ongoing improvements in the domestic production economy leading to the expansion of foreign exchange earnings will facilitate the maintenance of exchange rate stability, while meeting Sri Lanka’s debt obligations on time, in the period ahead as well, it said.