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Pressure on Sri Lanka’s exchange rate easing: central bank chief

By on August 19, 2022 0

ECONOMYNEXT – Pressure on the exchange rate is easing with higher interest rates and a slowdown in credit with premiums curbing downside as well, central bank governor Nandalal Weerasinghe said.

“We see pressure on the rupee easing due to export growth and import contraction and we hope this trend will continue,” Weerasinghe told a policy review meeting on Thursday, August 18. .

“On the foreign remittance side, the severe foreign exchange shortage has been addressed to some extent,” he said.

For the first five months of 2022, Sri Lanka earned $1.33 billion in remittances.

Import spending for the first five months of 2022 was $8.7 billion.

Weerasinghe said foreign exchange inflows, mainly remittances, helped pay for import expenses of key commodities.

“We are particularly capable of allocating foreign currency for the purchase of fuel, gasoline and medicine. The cost of imports has gone down and export earnings are at considerable levels,” he said.

“We are able to facilitate the purchase of basic needs of the country even without resorting to short-term loans. This is a positive sign compared to previous political decision-making.

“There are very few interventions [the central bank],” he said.

According to central bank data, Sri Lanka’s trade deficit narrowed to $3.5 billion in the first half of 2022 from $4.3 billion a year earlier as import spending slowed.

Export earnings for the month of July were $1.15 billion while import expenditure was $1.25 billion.

Central bank officials said the spread between the black market premium and banks has narrowed for forex.

The bank quotes the US dollar around 360 below an indicative peg while commercial banks were selling at around 370 levels.

However, it will continue to monitor exporters who earn dollars to repatriate the dollars to the country to further improve the situation. (Colombo/August 19, 2022)