Rupee value slides against major currencies

Colombo, May 19 (Daily Mirror) - In the wake of the Sri Lankan rupee depreciating rapidly against major international currencies, Central Bank Governor Dr. Nandalal Weerasinghe said the exchange rate decline could not be used as the sole criterion to determine the status of the economy, as it had both positive and negative implications.

The Sri Lankan rupee has depreciated by 4.8 percent against the US dollar under the current circumstances.

Responding to questions after the public seminar on the Economic Review 2025, he said the Indian rupee had depreciated by 6.4 percent to its lowest level, the Nepalese rupee by 6.2 percent, and the Indonesian rupiah by 5.2 percent.

As a result, he said currency depreciation was a global phenomenon, unlike in 2022 when it was a uniquely Sri Lankan situation.

Despite the exchange rate depreciation, he said the Indian economy was growing rapidly, and therefore the exchange rate alone could not be used as a yardstick to measure the health of an economy, though some people, unaware of this reality, spread misinformation.

However, he acknowledged that constant fluctuations in the exchange rate affect business operations, and said the Central Bank would deploy its policy tools to mitigate risks when necessary.

He cited the latest 15 percent increase in the surcharge on vehicle imports as a measure aimed at taming pressure on the exchange rate.

The Governor said Central Bank reserves could be boosted with US$ 700 million expected under IMF tranches and an additional US$ 200 million from the Asian Development Bank and the World Bank for scheduled programmes, eventually strengthening the exchange rate.

Meanwhile, addressing the Committee on Public Finance (CoPF), the Governor said the import bill had increasingly exceeded export revenue, primarily due to rising oil prices, which had resulted in the depreciation of the rupee.

The oil import bill of the Ceylon Petroleum Corporation (CPC) had exceeded US$ 1 billion for the first four months of this year, according to him.

Sri Lanka Muslim Congress (SLMC) leader MP Rauff Hakeem, who chaired the CoPF meeting, asked whether Sri Lanka was taking measures to mitigate economic risks arising from the fallout of the Middle East conflict.

Dr. Weerasinghe stressed the need for such measures to be taken in consultation between the Central Bank and the Ministry of Finance.