Central Bank disputes Fitch Solutions’ forecast on rupee
Posted on March 17th, 2023

Courtesy Daily Mirror

Disputing the grim forecast of Sri Lanka’s exchange rate by Fitch Solutions by the year-end, Central Bank Governor Dr. Nandalal Weerasinghe raised concerns on the basis of the forecast while stressing that such long-term predictions on exchange rate are not prudent.

Fitch Solution recently maintained its forecast for the rupee to weaken to a record low of 390 per dollar by the year-end despite the positive prospects of the country securing the US$ 2.9 billion International Monetary Fund (IMF) bailout package.

Dr. Weerasinghe noted that annual debt service obligation to the tune of US$ 6 billion until 2029  has been one of the assumptions of this forecast. However, he stressed that such a high figure of foreign debt servicing is unlikely given that the country is engaged in debt restructuring negotiations. 

Further, he opined that such a long-term prediction on an exchange rate of a currency is not practical.

Referring to the recent appreciation of the rupee, he remarked that the market will adjust to a new rate and if the need arises, the CB stands ready to intervene in the forex market in a limited capacity.

We have a small market, that’s why the exchange rate fluctuates a lot. That’s why the CB is required to intervene in the market to a certain extent. However, the CB would not act against the direction of market forces,” he stressed.

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