- Depends on outcome of 2025 Budget, IMF programme: Dr. Wijewardena
Experts anticipate that the Sri Lankan Rupee will be under significant pressure during 2025 amidst increased outflows.
Speaking to The Sunday Morning Business, Advocata Institute Chair Murtaza Jafferjee pointed out that Sri Lanka was still in the height of the tourist season and therefore inflows from tourism would continue to be strong until around end-March, causing the exchange rate to remain steady during the first quarter of the year.
However, he revealed that he expected the Sri Lankan Rupee to slowly start depreciating towards the latter half of Q1 2025 due to the increased demand during the 2025 Avurudu season.
Jafferjee stated: “Since the USDto-LKR buying rate peaked at around Rs. 290-291, it has slowly started to slip. This is to be expected because there was a significant appreciation of the LKR, which dropped from Rs. 300 to Rs. 291. The exchange rate will be market determined and therefore you will see some volatility.”
Accordingly, he revealed that it was not unreasonable to expect the currency to depreciate by around 5% from this point onwards, considering the significant appreciation observed last year.
He noted that Sri Lanka still did not have a fully market-determined exchange rate because although most of the import restrictions had been lifted, the restriction on the importation of most vehicles continued.
Accordingly, when the vehicle market fully opens as anticipated, there is expected to be a surge initially.
However, Jafferjee noted that according to reports, most banks had been accumulating US Dollars in anticipation of such a surge and therefore a larger part of the impact on the exchange rate would be mostly nullified.
Speaking to The Sunday Morning Business, economist and former Deputy Governor of the Central Bank of Sri Lanka (CBSL) Dr. W.A. Wijewardena stated that going forward, the movement of the exchange rate would be largely dependent on the outcome of the 2025 Budget and receipt of the fourth tranche from the International Monetary Fund (IMF) under the Extended Fund Facility (EFF) granted to Sri Lanka.
However, he said that the exchange rate would be under pressure because the expected outflows were high. “In fact, when we reach a debt agreement, our total outflows will be around $ 2 billion this year and our foreign reserves are not adequate,” he added.
According to the average buying and selling Telegraphic Transfer (TT) exchange rates published by the CBSL as of Thursday (23), based on quotes provided by selected licensed banks, the selling rate of a US Dollar was at Rs. 303.245 and the buying rate was at Rs. 294.47.