Sri Lanka devalues rupee pegging it at Rs.230 from Rs. 203 earlier

Sri Lanka’s rupee was devalued against the US dollar on Monday, pegging the US currency to Rs.230 per dollar. It was earlier Rs.203 for a considerable number of months.

In announcing this significant devaluation of the rupee, the Central Bank said it was the view that forex transactions would take place at levels which are not more than Rs. 230 per US dollar.

The rupee has been stuck at Rs.203 for several months despite pressure mounting on the Central Bank to adjust the currency to realistic levels. The black market rate for a dollar was Rs.240 to Rs.260 which resulted in migrant workers using this channel to send money back to their families.

A Central Bank incentive to pay migrant workers an extra Rs.10 per dollar (making it Rs.213 per dollar) didn’t work with remittances in January 2022 being much lower than the same month in 2021.

A Central Bank statement on Monday night said that considering the severity of the external shocks and recent developments in the domestic front, the Monetary Board had announced a comprehensive policy package on March 4 with a view to counter such economic headwinds. The Central Bank also indicated that it will continue to closely monitor the emerging macroeconomic and financial market developments, both globally and domestically, and will stand ready to take further measures as appropriate, with the aim of achieving stability in the fronts of inflation, the external sector, the financial sector, and real economic activity.

“In that context, greater flexibility in the exchange rate will be allowed to the markets with immediate effect,” it said in announcing the devaluation of the rupee. – ENDS -