Sri Lankan Rupee to hold ground

• Minor depreciation expected by mid-2026

Sri Lankan Rupee (LKR) is expected to show resilience with limited depreciation through 2025, though some pressure is anticipated in the first half of 2026, according to the mid-year outlook of First Capital Research. 

The firm projects the currency to trade between Rs. 300.0-310.0 against the US dollar for the remainder of 2025, extending its previous forecast.

Looking further ahead, First Capital anticipates the rupee will depreciate slightly, forecasting a range of Rs. 305.0-315.0 for the first half of 2026.

Despite a modest 2.3 percent year-to-date depreciation in the first half of 2025, the currency has held its ground, aided significantly by Central Bank’s (CB) aggressive purchases of US dollars from the market.

The external sector outlook remains positive, with the country’s current account forecast to remain in surplus for the third consecutive year in 2025. This positive balance is primarily supported by a strong performance in worker remittances and a continued upswing in service exports, particularly from the tourism sector.

“FCR forecasts the current account to remain in surplus for a third straight year in 2025E, primarily supported by stronger worker remittances and an upswing in services exports,” the report noted.

However, this surplus comes despite a widening trade deficit. The gap between imports and exports is expected to grow, driven largely by increased imports following the relaxation of restrictions on items such as personal vehicles. The recovery in import-reliant sectors like Food & Beverage and tourism is also contributing to the higher import bill.

Meanwhile, the report cautions that a 30 percent tariff imposed by the US on Sri Lankan exports could create distress for the export sector, potentially leading to decreased volumes and a loss of market share due to the country’s relatively high operating costs compared to regional peers. 

(NF)