Ensure stability of the rupee

It appears that the Central Bank may not have fully learned the lessons of the disastrous exchange-rate management of 2021–2022. During that period, the rupee was artificially maintained at around Rs. 210 despite growing market pressures. The eventual correction resulted in a sharp depreciation, the rate hitting Rs.360 resulting in shortages of essential goods, loss of investor confidence, and severe economic hardship. While today’s circumstances are different, there is concern that excessive intervention in the foreign-exchange market could once again distort economic realities. Exchange rate should broadly reflect underlying economic fundamentals. Prolonged attempts to hold a currency at an unrealistic level may offer temporary comfort,  but can lead to more painful adjustments later. The Central Bank’s role should be to prevent excessive volatility rather than defend a particular exchange rate. 

Upali Weerasinghe