A raft of policy measures recently introduced by the Sri Lankan government is expected to ease the excessive demand for foreign currency and reduce the pressure in the domestic foreign exchange market.
The Sri Lankan rupee depreciated at a faster pace of 9.7 per cent against the US dollar during the year up to 01 October 2018 . The country currently possess USD 7.5 billion in foreign reserves and expects to close this year with around USD 8.3 billion.
Speaking at a media conference, Central Bank Governor Indrajit Coomaraswamy said that they are in a better position now than in the past years. The Central Bank has intervened with USD 184 million in forex markets to defend the rupee so far this year. Coomaraswamy said that USD 84 million had been bought on Monday while noting that the foreign currency outflows stood at USD 487 million.
Central Bank total purchases of foreign exchange stood at USD 551 million while total sales amounted to USD 731 million during the year. The substantial surge in import expenditure was driven by the growth in imports of fuel, gold and personal motor vehicles.
Even though services related inflows such as tourism performed notably and the financial account of the Balance of Payments (BOP) strengthened during the year, outflows of foreign investment from the government securities market exerted pressure on the Balance of Payments (BOP).