ECONOMYNEXT – Pressure on the exchange rate is easing with higher interest rates and a slowdown in credit with kerb premiums also falling, central bank governor Nandalal Weerasinghe said.
“We are seeing the pressure on the rupee easing as a result of exports growing and imports contracting and we hope that trend will continue,” Weerasinghe said at a policy review meeting on Thursday August 18.
“On the foreign the remittances side, the severe shortage of forex has been settled down to a certain extent,” he said.
For the first five months of 2022 Sri Lanka has earned 1.33 billion dollars in remittance.
Import expenditure for the first five months of 2022 stood at 8.7 billion dollars.
Weerasinghe said forex inflows, mainly remittances, have helped pay for the import expenditure of key commodities.
“We are especially able to allocate forex for the purchase of fuel, gas, and medicine. The import cost has reduced and export income is at considerable levels,” he said.
“We are able to facilitate the purchase of basic needs of the country even without going for short term loans. That is a positive sign when compared with previous policy decision making.”
“There is very little intervention by [the central bank],” he said.
According to central bank data, Sri Lanka’s trade deficit has narrowed to 3.5 billion dollars in the first half of 2022 compared to 4.3 billion dollars in the previous year as import expenditure slows down.
Exports earnings for the month of July was 1.15 billion dollars while the import expenditure was 1.25 billion dollars.
Central bank officials said the gap between the black-market premium and the banks have reduced for forex.
The bank is quoting the US dollar around 360 under a guidance peg whereas commercial banks were selling at around 370 levels.
However, it will continue to monitor dollar earning exporters to repatriate the dollars into the country to further improve the situation. (Colombo/Aug19/2022)