Central Bank dollar sales hit 31-month high amidst currency pressure

​The Central Bank of Sri Lanka intervened in the domestic foreign exchange market by selling 71.5 million US dollars in March 2026, marking the highest level of monthly dollar sales since August 2023.

 Despite the heightened sales, the monetary authority maintained a net purchase position of 49 million US dollars for the month, which remains a sharp decline from the 461 million US dollars absorbed in February.

​The increased intervention occurs against a backdrop of emerging pressure on the local currency, with the rupee recording a year-to-date depreciation of 1.7 percent against the greenback as of 02 April 2026. Reflecting these dynamics, Standard Chartered Bank recently raised its USD-LKR forecasts to 325 for end-2026, up from a prior forecast of 315, and to 340 for end-2027.

 In response to the shifting market conditions, Central Bank officials have reiterated their commitment to a flexible exchange rate regime driven by market demand and supply, noting that short-term volatility will be tolerated and interventions are strictly intended to manage excess volatility.

​Market analysts and a recent Standard Chartered Global Research report attribute this depreciation pressure to a combination of falling tourism revenues, softer worker remittances, and a globally stronger US dollar.

 Standard Chartered highlights that Sri Lanka faces a renewed external shock from higher energy prices amid the ongoing Middle East conflict, raising risks to the country›s growth, inflation, and the balance of payments. The country›s heavy reliance on energy imports, combined with weaker tourism and softer remittances - approximately 50 per cent of which originate from Gulf Cooperation Council (GCC) countries is expected to widen the trade deficit.  

Consequently, Standard Chartered now expects a current account deficit of 1 percent of GDP in 2026, completely reversing its previous forecast of a 1 percent surplus.

​Despite the recent uptick in dollar sales, the overall net purchase position indicates that the Central Bank is continuing its broader strategy of accumulating buffers and building reserves. Gross official reserves were provisionally estimated at a robust US$ 7,270 million by the end of February 2026, a figure that includes proceeds from the People’s Bank of China swap arrangement. 

Standard Chartered notes that these foreign exchange reserves cover four months of imports and remain adequate in the near term.

 Meanwhile, the government securities market has seen a slight outflow of foreign capital, with the rupee value of Treasury bills and Treasury bonds held by foreign investors declining by approximately 3.35 percent during the reporting week. In absolute terms, the outstanding stock of government securities held by foreigners fell to Rs. 143,617 million from Rs. 148,597 million the previous week.(NF)