Financial Times

Central Bank sees foreign inflows stabilising rupee at 100
By Duruthu Edirimuni
The Central Bank said last week there was no need for the rupee to depreciate further because an inflow of dollars was anticipated with the government's announcement of its economic policy.

The exchange rate is expected to stabilise after reaching the Rs 100 to the dollar mark last week helped by steady inflows of foreign remittances, Central Bank Deputy Governor, W. A. Wijewardena told The Sunday Times FT.

Following the uncertainty witnessed after the elections, there was a shortage of foreign exchange but the economy continues to be resilient and it would be desirable to maintain the momentum of economic growth, he added.

Wijewardena said the UPFA's policy statement will fortify confidence in the market and reduce its insecurity. The delays in foreign inflows have exerted some upward pressure on the foreign exchange market, creating undue volatility, but the intervention by the regulator in the foreign exchange market has helped to inhibit some of this volatility, Wijewardena said.

"In time to come the outflow of foreign exchange will be less than the inflow and there will be a surplus with which the exchange rate will stabilise," he said. "The first quarter of 2004 has seen a healthy economic growth which is a continuation of the economic recovery that the country has seen in the recent past."

He said that the Central Bank cannot speculate about the donor funds, but with the peace process on track and the economic policy identified, foreign donors are committed to fund the negotiated foreign projects. He said that the regulator will not tighten nor loosen the monetary policy, but go with the existing stance.

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