Sri Lanka Central Bank sees further rupee weakening to retain competitiveness
Nov 09, 2017 11:07 AM GMT+0530 | 0 Comment(s)
ECONOMYNEXT – Sri Lanka’s rupee depreciated by 2.2 per cent against the US dollar during the year up to end September 2017 but further weakening is needed to restore export competitiveness, the Central Bank said in its latest economic update.
The depreciation pressure on the rupee further eased gradually from May 2017, with improved investor confidence following the issuance of the international sovereign bond and receipt of more funds under an International Monetary Fund loan.
Reflecting the nominal movement of the Sri Lankan rupee against some of the major currencies, both the 5-currency and 24-currency nominal effective exchange rate (NEER) indices depreciated during the year up to end September 2017, the central bank said.
“The real effective exchange rate (REER) indices, which also take into account the inflation differential amongst countries in the currency basket, depreciated considerably during the period under review,” the bank’s economic update said.
However, it said REER "remained above the 100 threshold, suggesting the need for further depreciation to reach the level of competitiveness that prevailed in 2010.”
The improved external environment helped the Central Bank to implement a more market based exchange rate policy in 2017, under which it intervened in the domestic foreign exchange market to build up international reserves with minimal impact on the exchange rate.
(COLOMBO, November 09, 2017)