The Central Bank of Sri Lanka announced yesterday that it had given the freedom to market forces to determine the exchange rates.
According to media release issued by the Central Bank, this is being done with the aim to stabilise the rupee and to permit free transactions in the market.
Commenting on this development, Assistant to the Central Bank Governor M. D. Dissanayake said that this is another state of liberalisation of exchange rates in relation to the US dollar.
He also said this new development would mean that the Central Bank has allowed the market forces to operate.
However, they are not allowed to hold excess dollars or other foreign exchange for speculative purposes.
The Central Bank also will fix limits and commercial banks cannot go beyond that. The excess currency will have to be sold in the market or to the Central Bank, which means that the rates will not allow rise beyond a certain point.
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