Sri Lanka’s Central Bank (CBSL) projects that the currency fluctuation that is to be seen in the coming months will stabilise demand during the festive season in December, in light of increased imports and credit growth in the local market, CBSL Governor Dr. Nandalal Weerasinghe said during the 6th Monetary Policy Review of 2025, held yesterday (26).
“Under the current exchange rate determiner regime, the exchange rate can move both ways. It’s not a one way movement,” Weerasinghe said, noting concerns of Sri Lanka’s exchange rates, moving into a period of typical high demand for imports.
“We have seen in the last couple of weeks the depreciation has had some turn around. Gradual movement in both ways is good. We will ensure there will be a movement in both ways. That will stabilise external demand.”
Weerasinghe noted that the higher demand for foreign exchange in terms of imports will be reflected in the currency on a gradual basis. “At the same time, remittances, tourism and exports are also doing well, as a result we are seeing some kind of a balance between demand and supply,” he reassured.
However, he added that in the short term if there appears to be disorderly movement, the CBSL may intervene. “But in the short term if at all the Central Bank intervenes, if there is an undue disorderly adjustment (needed) we will intervene and smoothen out that overall rate.”
He said that the reserve bank had recently intervened to adjust disorderly performance, in order to cull volatility. “In the last few days we saw some disorderly adjustment of the interest rate. There was one day where within the span of two hours the rate changed with two transactions, we intervened and stabilised it.” Weerasinghe also said that the behaviour had been attributed to the increase in overall imports and growth in reserves.
On the other hand, Weerasinghe noted that Sri Lanka’s current account surplus of $ 1 billion is to continue to be maintained. “Our overall assessment is that, if you saw the current account surplus this year, it's still going to be a $ 1 billion surplus. That’s coming from other foreign exchange inflows.”
He further assured that the demand for vehicle imports are to progressively dissipate and stabilise, projected from the gradual drop in LCs opened since its peak in July. “Due to the lifting of the vehicle import ban, the amount of LCs opened picked up in July suddenly and imports increased. Now we see that the data on the high level of LCs is dropping progressively.”
“In November and December, based on the records of July, August and so forth, we can project this to drop. Looking forward we can see that the pent-up demand will stabilise and the vehicle prices will also drop, imports are also to some level have stabilised.”