- Buying rate set at Rs. 225.2
- Devalues rupee by 13.3%
BY Shenal Fernando
According to the exchange rate data published by the Central Bank of Sri Lanka (CBSL) yesterday (8), the buying rate of the US dollar (USD) was recorded at Rs. 225.20 while the selling rate for the USD stands at Rs. 229.99 today.
The CBSL yesterday devalued the Sri Lanka rupee by 13.3% to address the prevailing foriegn currency liquidity crisis in the country as a consequence of the external shocks and recent developments in the domestic front.
This development comes in the aftermath of the press release published by the CBSL dated 7 March 2022, where the CBSL declared that as part of its policy package to support greater macroeconomic stability, it will allow the domestic foreign exchange market greater flexibility in relation to the exchange rate, with foreign exchange transactions allowed to take place up to a maximum cap of Rs. 230.
The CBSL in its press release claimed that the Monetary Board of the CCBSL had on 4 March 2022 announced a comprehensive policy package to counter the severity of the external shocks and recent developments in the domestic front. The CBSL further indicated that it would closely monitor the emerging macroeconomic and financial market developments, both globally and domestically, and will take appropriate measures to ensure stability in terms of inflation, the external sector, the financial sector, and real economic activity.
Accordingly, the CBSL stated: “In that context, greater flexibility in the exchange rate will be allowed to the markets with immediate effect. The Central Bank is also of the view that forex transactions would take place at levels which are not more than Rs. 230 per US dollar.”
In the aftermath of this announcement, the Bank of Ceylon (BOC) and the Nations Development Bank (NDB) were offering to buy USD at Rs. 227 and were selling at Rs. 230. The Commercial Bank of Ceylon (ComBank) and Sampath Bank were offering to buy USD at Rs. 224 and were selling at Rs. 230.
Speaking at the press conference held yesterday to announce the weekly cabinet decisions, Cabinet Spokesman and Minister of Mass Media Dullas Alahapperuma stated that CBSL Governor Ajith Nivard Cabraal would explain this development relating to the exchange rate further at a press conference to be held today (9).
Prior to the devaluation of the Sri Lankan rupee by the CBSL yesterday, there was significant disparity between the exchange rate offered by the CBSL (Rs. 203) and the rate offered by the black market (around Rs. 250-270), which led to a drastic decrease in forex inflows to the country through official channels as people either kept their forex abroad or remitted it through unofficial channels in order to enjoy the premium on offer in the black market.
