CBSL urges businesses to grasp exchange rate dynamics for stability

In a bid to foster economic stability amidst recent currency fluctuations, the Central Bank of Sri Lanka has underscored the importance of local businesses understanding the nuances of the exchange rate system. 

Addressing concerns raised by the business community, particularly exporters, regarding the recent surge in the value of the rupee, Central Bank Governor Dr. Nandalal Weerasinghe emphasized the need for businesses to develop more accurate expectations regarding exchange rates. He highlighted that misconceptions and lack of understanding regarding exchange rate dynamics can lead to financial losses for businesses, urging them to adapt to the current regime to make more informed decisions.

Dr. Weerasinghe explained that the current exchange rate regime aims to mitigate volatility but emphasized that addressing fundamental macroeconomic issues such as fiscal and external balances is essential for sustained stability. He cautioned against attempts to artificially control exchange rates without addressing underlying economic imbalances, warning of potential boom-and-bust cycles.

In parallel, Bingumal Thewarathanthri, Chairman of the Sri Lanka Banks’ Association and CEO of Standard Chartered Sri Lanka, forecasted a potential strengthening of the rupee following the completion of external debt restructuring, but anticipates subsequent depreciation thereafter due to various factors.