Sri Lanka's present Government will not resort to reactive, short-term interventions aimed at countering minor daily movements in the exchange rate and instead will rely on market-stabilising interventions, allowing the market to continue to function, Deputy Minister of Finance Dr Anil Jayantha Fernando said in Parliament yesterday (21).

Addressing opposition concerns over the recent depreciation of the Sri Lankan rupee, which has reached approximately Rs 350 per dollar, Fernando said: “We know, when a foreign exchange rate fluctuates within a day or two, it comes to a point where it cannot be controlled. The reason is that these isolated interventions meant to control the rate result in economic shrinkage.”

He went on to say: “Our solution should not be to shrink or halt the economy. It is within an active economy that this should be done. If we halt the economy and look for solutions, this would lead to a crisis. Some countries have reached a state of crisis. This is called stagflation, a stagnation of the economy, then inflation rises.”

Speaking on the state of the economy in 2022, Fernando said that the consequences stemmed from “wrongful decisions” made by the previous administration, such as the import ban implemented in 2021 and the suspension of debt repayments.

“In terms of the economy, the Government had created a collapse with wrongful decisions, without Government financial planning, is what caused this collapse. Wrong policies, wrong administrative decisions. By blocking growth and imports; avoiding settling debt; saving the dollar reserves without doing anything, that is what led to the foreign exchange rate increase.”

Fernando said that the depreciation was not caused by the present Government and is instead due to external factors.

“The reason for this increase is not by fault of decisions we have taken as a country; it is due to external factors,” he said. “The Opposition tried to make a comparison of this with 2022, when the foreign exchange rate of the Sri Lankan rupee against the dollar reached Rs 370, saying that the current rate is almost there.”

“Right now, we accept that the foreign exchange rate has increased to a certain level. As a warning, they tried to insinuate that once it reaches Rs 370, that would be a sign of economic collapse, which had been the case under the Gotabaya Government.”

The Sri Lankan rupee has seen steady depreciation since late February 2026. At the onset of the US-Israeli conflict with Iran, the exchange rate stood at approximately Rs 309.50 per US dollar.

From the end of February to 25 March, the rupee depreciated by 1.6% to around Rs 313-314. The downward trend continued into April, with year-to-date depreciation widening to 2.9% by the end of that month, pushing the rate to approximately Rs 319-320.

In the first half of May, the rupee remained within the Rs 319-321 range until it slid sharply, with its selling rate surpassing Rs 338 on 19 May. From 19 to 20 May, the selling rate jumped nearly Rs 5, crossing above Rs 342.70. Yesterday, the rupee reached Rs 350, according to the latest daily exchange rates issued by the Central Bank of Sri Lanka.

Meanwhile, Sri Lanka's Q1 2026 trade deficit widened to $ 2.31 billion, up 53% from the previous year.