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Thursday, February 16, 2012 - 6.43 GMT

Forex market current developments temporary -CB


The recent depreciation of the Sri Lanka Rupee, which seems to be a reaction of forex dealers adjusting to the more vibrant market driven policy framework, would appear to be a temporary overshooting of the realistic level, says the Central Bank.

The Central Bank decided to limit its intervention in the forex market, with effect from 10th February 2012, so as to limit the supply of foreign exchange to the extent needed to settle the bulk of 3petroleum import bills, and to absorb surplus forex liquidity that would flow into the market from various sources including the issue of Tier-2 capital by banks, inflows to equity and bond markets etc., that may otherwise lead to the undue appreciation of the rupee, the Bank said.

At the same time, in view of increased oil prices in the international market, the government has also decided to increase the domestic prices of petroleum products with effect from 12thFebruary 2012. Such policy action would encourage energy conservation and help reduce the use of oil products, thereby reducing the expenditure of imports further, the Bank further said.

In addition, several expected inflows to the Financial Account of the Balance of Payments in 2012, as set out in the Central Bank’s ‘Road Map for 2012 and beyond’, are now at varied stages of realization and such inflows are expected to augment inflows during 2012.





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Last modified: February 16, 2012.

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