Sri Lanka to relax currency band as it moves towards market driven exchange rate

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COLOMBO : Sri Lanka will relax its currency band from next week, its central bank said on Friday, as part of efforts to move towards a market-determined exchange rate as it seeks to secure a $2.9 billion bailout from the International Monetary Fund.The central bank also raised interest rates by 100 basis

COLOMBO : Sri Lanka will relax its currency band from next week, its central bank said on Friday, as part of efforts to move towards a market-determined exchange rate as it seeks to secure a $2.9 billion bailout from the International Monetary Fund.

The currency band was widened earlier on Friday to 10 rupees either side of the spot rate, from 7.50 rupees previously, but Central Bank Governor P. Nandalal Weerasinghe said guidance on the currency band would be removed from next Tuesday. "The central bank has seen gradual improvement in the forex liquidity in the banking sector. We are careful to contain excessive volatility," Weerasinghe said, adding that the central bank purchased $308 million to maintain exchange rates within the corridor mandated by the monetary authority.

The central bank raised interest rates by 100bps, pushing its standing deposit facility rate and standing lending facility rate, to 15.50 per cent and 16.50 per cent respectively.

 

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